(Bloomberg) -- Goldman Sachs Group Inc. Chief Executive Officer David Solomon said he believed that activity in mergers and public listings will find a comfortable level despite uncertainty that’s led to a slowdown across investment banks.

“If the level of uncertainty grows from here, yes, you will not see the same amount of capital activity — but things will settle down,” Solomon said in an interview with Bloomberg Television’s Francine Lacqua on Tuesday. “People need to transact, need to raise capital, need liquidity for their investments. Part of this is just a reset of expectations.”

The banking executive cautioned that the current level of policy certainty was unhealthy for public and private markets, in which his company has growing stakes. In the interview, conducted in Oslo before the annual investment conference of Norway’s sovereign wealth fund, Solomon warned that layoffs are likely to rise as corporate executives make expense management a key priority for the year.

“The policy actions to date have raised the level of uncertainty to a degree I do not think is healthy for investment and growth,” said Solomon. “As I am talking to CEOs, talking to our clients, they are holding back on investment and they are certainly tightening their belts.”

While the second quarter is off to a softer start and many IPOs are on pause, Solomon isn’t ready to call time on the industry’s hopes for a rebound in merger activity sometime later this year or next year. He noted that private equity dealmaking and the number of mergers that were over $500 million in size actually increased in the first quarter.

“Capital markets activity was up year-over-year in the first quarter,” Solomon said. “If the level of uncertainy grows from here, yes you won’t see the same amount of capital markets activity. But my own belief is things will settle down, we’ll have a clearer policy perspective and some normalization of capital markets.”

While deal activity has remained lower than expected so far this year, banks’ trading desks have profited from the uncertainty in public markets: Goldman’s stock traders posted a record quarter for the first three months of this year, mirroring a trend across Wall Street.

Solomon, who said he was encouraged by what he was hearing from the US Treasury on easing banking regulation there, also weighed in on regulation in Europe, where a major stimulus package in Germany has improved hopes for growth in the region as US markets lag behind.

The finance executive said he was hopeful that officials in Brussels would roll back regulation that’s prevented cohesive growth in capital markets and consolidation in the banking sector.

“I definitely take away a sense of resolve, of excitement, about actually moving forward, breaking down some of the regulatory barriers that have been inhibitions to growth here, and that would be quite constructive,” he said, referring to Europe. “More stimulative fiscal action here would also be good for growth.”

--With assistance from Francine Lacqua.

(Updates with more quotes from the interview beginning in fifth paragraph.)