Goldman Sachs shares shattered a 10-year record to reach a fresh closing high on Tuesday, buoyed by hopes that the Trump administration will bring a profit-boosting mix of higher interest rates, lower taxes and lighter regulation.
All banks have rallied hard since November 8, when Mr Trump beat Hillary Clinton in the race to the White House. But only a handful have done as well as Goldman, which normally benefits more than rivals from vigorous capital markets and gentler rules around trading.
Analysts attributed the 1.3 per cent rise on Tuesday — to a closing price of $249.46 — to healthy conditions in debt and equity markets, which bodes well for first-quarter earnings, and insistent pressure on regulators to relax restrictions put in place since the crisis.
Goldman, founded 148 years ago, has long dominated its chosen niches of securities trading and investment banking, and is a rising force in asset management. Like most of its peers, it has struggled since the crisis to get to grips with tougher standards on capital and liquidity and all manner of new curbs on risk-taking.
Even so, the shares have gained more than three times the increase in the S&P 500 since the company went public in 1999, up 257 per cent versus the index’s 78 per cent rise. In December, the bank’s market capitalisation crashed through $100bn for the first time in a decade, boosted by a pick-up in trading following the election of Mr Trump.
Guy Moszkowski, analyst at Autonomous, cited a letter last week from a Republican senator to Janet Yellen, Fed chair, asking her to scrap the non-statutory annual assessment of how well a bank manages its capital. Brennan Hawken at UBS noted the resignation from the Fed of Dan Tarullo, seen as a tough taskmaster for the banks, who is likely to be replaced by a more “pro-market” figure.
Investors are starting to realise that “personnel is policy”, said Mr Hawken. “They’re realising that the people we put in these regulatory positions will effect a policy change, even if there is no change to the letter of the law.”
Analysts also note that Mr Trump has hired a string of ex-Goldman executives to fill senior positions, despite a campaign-trail pledge to “drain the swamp” by severing ties between Wall Street and Washington.
Gary Cohn, who was Goldman’s president and chief operating officer until December last year, is now serving as Mr Trump’s right-hand man on financial regulation. On Monday evening Steven Mnuchin, a former technology chief at Goldman, was confirmed as America’s 77th Treasury Secretary.
Some analysts draw parallels with Hank Paulson and Robert Rubin, both of whom led Goldman (as co-chair and chief executive respectively) before running generally bank-friendly Treasury departments.
Investors are starting to realise that ‘personnel is policy’
Goldman set its previous nominal closing high of $247.92 on October 31 2007, when many investors were still piling into the big banks, convinced that they could shrug off damage from the fast-fading housing market.
The shares still have a little way to go to hit their record intraday high of $250.70, which was also set 10 years ago on what was Halloween.
Even after the 37 per cent run-up of the past few months, just two of 31 analysts recommend that investors sell the shares. But many have already booked profits.
David Pastel, chairman and chief executive of Pastel & Associés, a Paris-based fund manager, bought stock in Goldman last summer because it was trading at a big discount to book value, at about $150 a share. He sold in December at about $220, about 1.2 times book.
“Whatever people might think about the ethics of Goldman Sachs, it we look at things from the standpoint of society as a whole, it is clearly one of the best of the league if you look . . . from an investment-banking point of view,” he said.
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