Improved trading business seems to help Goldman Sachs as hedge funds rebound
Bank stocks have spiked in post-election era as macro conditions have started to favor the financial institutions. Fixed income trading has improved for banks in the past couple of quarters, and with Trump administration and higher rates, the fog has cleared for the banking sector. As the trading business seems to improve, Goldman Sachs Group Inc (NYSE:GS) might just stand out among the financial institutions.
According to Wall Street report, Goldman Sachs is expected to benefit from its core clients, hedge funds, which are looking to strengthen with improved trading businesses. Pre-election, low market volatility and low interest rates seemed to choke the banks. Now that the equity markets have continued to thrive post-election, active traders and hedge funds are expected to benefit Goldman Sachs.
Goldman Sachs has lost much of its market share in fixed income trading to JPMorgan and Morgan Stanley. Fixed income trading of Goldman Sachs has declined from 2010. The latest improvements in trading business have not quite been the best thing for the bank. However, the stock seems to rise significantly, as investors realize the opportunity for Goldman Sachs to stand out.
Trading revenues have rewarded banks significantly in the fourth quarter, according to the sources. In lure of the trading business, Goldman Sachs has outpaced JPMorgan and Citigroup in terms of stock price gain. Its stock are up by almost a third since the election day as the stock is closing at it all time high of $248. The stock closed at $241.85 last week.
The yield curve has also steepened since the Election Day, which gauges the health of the economy. The steeper the curve, the better outlook of the economy! Better outlook also allows the trading business and hedge funds to invest more confidently. Hedge funds lost billions of dollars in 2016 during the market sell-off, but the rebound has changed the picture suddenly.