Goldman Stock Hits Record on Bets Trump Will Unleash Wall Street

  • Stock has jumped 37% since election, leading Dow Index higher
  • Trump blasted bank in campaign, then named alumni to top posts

Should Investors Be Enthusiastic About U.S. Equities?

Goldman Sachs Group Inc. climbed to a record high on optimism President Donald Trump’s administration will spur trading and dealmaking, slash corporate taxes and roll back costly regulations after installing the firm’s executives in top government posts.

The shares rose 1.3 percent to $249.46 at 4 p.m. in New York, passing a record close set in late 2007, just before the industry plunged into a crisis that almost brought down the global financial system. Goldman’s stock recovered much of its loss in the years after that turmoil, and since Trump’s election has soared 37 percent, leading the Dow Jones Industrial Average higher.

Investors are betting big U.S. banks can generate larger profits and pay out more to shareholders if Trump sidelines the industry’s sharpest critics, dismantles post-crisis rules and pursues policies that spur inflation and lift long-term interest rates. While Trump repeatedly attacked Goldman Sachs’s government influence during his campaign, the New York-based firm is now positioned to have its market philosophies expressed in policy in coming years.

Read more: Banks see higher interest rates goosing profits

In December, Trump enlisted the investment bank’s then-president, Gary Cohn, to serve as the White House’s top economic adviser. On Monday, the Senate confirmed former Goldman partner Steven Mnuchin as U.S. Treasury secretary. Dina Powell, who ran the firm’s philanthropic arm, was named an assistant to the president, and Jim Donovan, a wealth manager, might also join the administration. Steve Bannon, who left the bank more than two decades ago, is Trump’s chief strategist.

Trump signed an executive order on Jan. 28 requiring appointees such as Cohn to recuse themselves from decisions “directly and substantially related” to their former employers for two years. Democratic Senators Elizabeth Warren and Tammy Baldwin called on Cohn this month to also withdraw from matters that may have “a significant indirect impact on Goldman” for as long as he serves in the administration.

The Dow has climbed 12 percent since the Nov. 8 election, with JPMorgan Chase & Co. the second-best performer behind Goldman. The broader S&P 500 has gained 9.3 percent, with financial firms, oil drillers, rail and freight companies and airlines among those advancing. Apple Inc. shares reached a record this week on optimism the next iPhone will drive a resurgence in sales.

Trump’s election already set off a flurry of market trading, boosting banks’ profits in the final months of 2016 as customers rushed to reposition their portfolios, generating fees. Such activity may remain elevated as the new president crafts policies and pushes companies to change practices, sometimes taking to Twitter.

Goldman Sachs’s profits in recent years are still short of pre-crisis levels. Net income amounted to $7.4 billion in 2016, about 22 percent less than in 2006. Its revenue of $30.6 billion last year was about 19 percent lower.

The firm expressed some concern this month about Trump’s ability to quickly jump-start growth. Chief economist Jan Hatzius and economist Jari Stehn wrote that they anticipate a delayed boost from increased government spending because legislation probably won’t pass until late 2017 or early 2018. “The more adverse parts” of Trump’s agenda remain substantial, they said.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE