Goldman Sachs has experienced a robust start to the new trading year, with shares increasing by more than 6%. This comes after an impressive rally of over 48% last year. The financial giant is projected to benefit significantly from the evolving regulatory landscape, driven by President-elect Donald Trump's preference for deregulation. A shift in CEO confidence, particularly following the U.S. election results, has been notable and is expected to favor Goldman Sachs.
Goldman Sachs is anticipated to capitalize on a more balanced regulatory environment.
"We expect Goldman Sachs to be among the biggest beneficiaries of a more balanced regulatory environment, especially a change in regulatory attitudes toward the capital markets business," – Ebrahim Poonawala
The expectation is that less regulatory oversight will enhance investor confidence in Goldman Sachs' ability to deliver sustainable returns on equity. This optimistic outlook is further supported by Goldman's recent financial performance, with better-than-expected earnings for the fourth quarter, bolstered by strong trading results.
CEO David Solomon noted a positive shift in sentiment among chief executives post-election.
"There has been a meaningful shift in CEO confidence, particularly following the results of the U.S. election," – David Solomon
This renewed confidence is likely to translate into improved flexibility in capital allocation and optimization of capital usage at Goldman Sachs.
"This should lead to improved flexibility on capital allocation and allow mgmt. to optimize capital usage as it works towards positioning the franchise to deliver a mid-teens through-the-cycle ROE." – Ebrahim Poonawala
Analyst Ebrahim Poonawala has set a $675 price target for Goldman Sachs, implying an 11.4% upside over Wednesday's close. Although Poonawala's note did not specifically mention Trump, it aligns with the broader market sentiment associated with Trump's advocacy for reduced business regulation. Stocks, including Goldman Sachs, rallied following Trump's electoral victory, highlighting market expectations for a deregulatory approach.
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