Herman Jin
Formerly in Asia FICC at Goldman Sachs, Macro & Semiconductor Investing
Banks' weak response to earnings despite low expectations warrants caution into the rest of Q3 reporting. JPMorgan, Wells Fargo, Citigroup and Goldman Sachs all fell after mixed results, while the bank ETF also declined. x.comÂ
US financials could lead the market into year-end if the Fed signals at the upcoming FOMC that rates will stay higher for longer, as expected. The financial sector is breaking out on the weekly chart, and banks such as JPMorgan, Goldman Sachs, Morgan Stanley and Bank of America are quietly reclaiming trend and pushing toward new highs. x.comÂ
Morgan Stanley and Goldman Sachs face a negative multiplier effect as worries about the return on AI capital spending start to be priced into tech. After 18 months of enthusiasm about AI spending returns, CNBC Halftime panelists are now finally concerned about its ROIC. That suggests the concern is being discounted in tech prices, which hurts related areas like brokerages that the show's investment committee has embraced. x.comÂ
Goldman Sachs's meager roughly 4.8% implied earnings move and past positive reactions make a relief bounce plausible after a 25% slide. Long seen as a top-tier bank, it is among its peers' worst performers this year; shares rose after 8 of its last 11 earnings reports, including a 9% jump last time that doubled the implied move. Earnings are Tuesday before the open. x.comÂ
Bank negativity may be priced in for Goldman Sachs, Morgan Stanley and Bank of America; stable credit and an active deal pipeline could bring relief. Goldman and Morgan Stanley are down about 14% in three months and sit 22% and 17% below their highs, respectively; Bank of America lost 13% in a month. x.comÂ
Private credit and major financials, including Ares, Carlyle, KKR, Blue Owl, Blackstone, JPMorgan and Goldman Sachs, are in the doghouse over a risk the market fears more than the Iran war. Anthropic's Dario Amodei has said something similar, and more and more companies are letting people go. x.comÂ
Bank stocks look buyable if systematic selling is reacting to a flatter yield curve: the front end that drives earnings has barely moved. JPMorgan and Citi card spending rose 10% and 13%, and Citi and Wells Fargo reported lower credit losses. Wells expects steady margins and improving interest income as loans grow and old fixed-rate assets roll into higher yields. Funds crowded into banks before results, limiting near-term buyers. x.comÂ
Goldman Sachs' compressed valuation and tempered expectations improve its risk/reward. After a 20%-plus sell-off, its forward P/E is in the low-to-mid 12s, and management has cooled expectations for FICC and expenses. A positive earnings reaction Tuesday has room if equities deliver, the backlog stays healthy, or expenses are better than feared. x.comÂ
Goldman's sharply higher equities-trading revenue and longer-run stock gains make the current drawdown tolerable. The division's net revenue rose 72% to $6.44 billion and drove 77% of Goldman's year-over-year net revenue increase. Despite ugly recent price action, the stock is up 18% over one year and 203% over three years. x.comÂ
JPMorgan is buyable on pullbacks to its daily 9-period moving average ahead of an earnings run-up in early July, with financials such as Goldman Sachs, Citigroup, Interactive Brokers and Bank of America doing great. x.comÂ