Goldman Sachs Group Trading forecasts and signals

The session on July 18, the main American stock exchanges ended in the red. The S&P 500 declined by 0.84% to 3,831 points, the Dow Jones lost 0.69%, the Nasdaq declined by 0.81%. Energy companies closed in the black (+1.96%), producers of cyclical consumer goods (+0.22%), as well as raw materials and supplies (+0.22%). The healthcare industry turned out to be an outsider (-2.15%) on the eve of reports from medical equipment manufacturers.Company newsGoldman Sachs (GS: +2.5%) reported second quarter EPS better than consensus expectations. DPS increased by 25%.Apple (AAPL: -2.1%) plans to slow down the pace of hiring new employees and optimize the costs of some departments next year, fearing a recession.The takeover of Seagen (SGEN: -5.7%) by Merck (MRK: -2.76%) may be postponed until additional clinical trial results are available, according to the WSJ.We expectMarket participants are taking a wait-and-see attitude, weighing a number of "bullish" and "bearish" theses. The high probability of a 75 bps rate hike at the next Fed meeting is already being assessed as a positive factor. The thesis of reaching the peak of inflation is supported by the easing of tension in supply chains, an excess of stocks at retailers and a decline in commodity prices in the medium term. The risk of a decrease in corporate profits, which worried investors on the eve of the reporting season, has not yet been realized. According to FactSet, the cumulative profit growth of companies from the S&P 500, which have already submitted quarterly results, so far exceeds preliminary estimates. A positive signal for the markets came from China, where changes in monetary policy are expected to stimulate economic growth. However, concerns are caused by an increase in the number of COVID-19 infections in China. Negative factors are expectations of a recession and a decline in corporate profits in 2023, a still strong dollar and new statements by companies about slowing down or freezing hiring of new employees.Trading on July 19 on the sites of Southeast Asia ended mainly in the red zone. China's CSI 300 lost 0.54%, Hong Kong's Hang Seng declined 0.89%. The Japanese Nikkei added 0.65%. Eurostoxx 50 is adjusted by 0.32% since the opening of trading.Brent crude futures are quoted at $105.5 per barrel. Gold is trading at $1,711.3 per troy ounce.In our opinion, the S&P 500 will hold the upcoming session in the range of 3780-3850 points.MacrostatisticsNo significant macro statistics are expected to be published today.Sentiment IndexThe sentiment index rose by one point to 30.Technical pictureThe closest support for the S&P 500 remains the range of 3600-3660 points. The RSI and MACD indicators signal an insufficient strength of the upward momentum. Yesterday, the benchmark bounced off the upper limit of the descending channel and is likely to continue to adjust in the coming trading sessions.ReportsNetflix, Inc. (NFLX) will present quarterly results on July 19 today after the market closes. The consensus forecast predicts revenue growth of 9.4% YoY, to $8.03 billion, with a decrease in GAAP EPS from $2.97 to $2.96. Note that market expectations look very cautious compared to the company's own guidance, which assumes revenue of $8.05 billion with EPS at $3.00. The latest data from Apptopia, which JPMorgan cites, indicate weak trends towards changing the audience of the streaming service in April-June, even despite the successful release of the new season of the popular TV series "Very Strange Things". We do not exclude that the net outflow of subscribers may slightly exceed the 2 million stipulated in the consensus. The reaction of investors to the streaming service's report will depend on whether the company's guidelines for the dynamics of subscribers for the third quarter coincide with market forecasts that suggest an expansion of the audience in the range of 1.5–1.9 million. These values look achievable, but there is no reason to hope for more optimistic forecasts yet. We believe that the expansion of the Netflix subscriber base constrains both the desire of consumers to optimize spending on entertainment, and competition from Apple (AAPL), Disney (DIS) and Warner Bros. Discovery (WBD). Special attention will be paid to management's comments on operating marginality due to the high rates of wage growth in the United ...

The largest American banks Morgan Stanley, Goldman Sachs, Bank of America and Wells Fargo have increased their dividend payments after they passed the annual stress test from the US Federal Reserve. The regulator noted that the country's main creditors can easily survive a serious economic downturn, thereby providing an opportunity to redistribute excess capital among bank shareholders. The test determines the "stress buffer of capital", that is, an additional financial cushion in excess of the standard, its size comes from possible losses.Morgan Stanley plans to raise its dividend to 77.5 cents per share and a $20 billion buyback program, Goldman Sachs increases its dividend by 25% to $2.5 per share, Bank of America raised its dividend by 5% to 22 cents per share, and Wells Fargo plans to raise its dividend to 30 cents per share.However, this year the increase in dividends has become more restrained than in the past, which was a record for bank capital payments. In addition, JPMorgan & Chase and Citigroup kept their dividends at the same level, since the difficult economic situation may require an increase in capital. Citi is likely to provide an update on its dividend plans as part of its next earnings report on July 15.As part of the annual stress test introduced after the financial crisis of 2007-2009, the Fed assesses how banks' balance sheets will withstand a hypothetical severe economic downturn. The results determine how much capital banks need to operate and how much they can return to ...

Despite the fact that large American banks exceeded analysts' expectations for profits, this did not stop the decline of the banking sector.At the moment, reports from 5 of the 6 largest US banks have been released:JPMorgan (JPM);Citigroup (C);Wells Fargo (WFC);Goldman Sachs (GS);Morgan Stanely (MS).The reports are good, why is everything falling?Analysts' expectations were underestimated due to the military actions in Ukraine, so it was not difficult to exceed them. Before the reports were released, it was unclear how much banks would suffer as a result of all this, and the market expected the worst.If you look at the dynamics of profit and compare it with the corresponding quarter of last year, then all banks showed a serious drop. For example, the profits of JP Morgan and Citigroup fell by more than 40%. Wells Fargo showed a decrease of only 20%: it is less focused on the Wall Street divisions, and is focused on retail and commercial customers in the United States.Why did profits decline so sharply?Banks give two reasons:Since the end of 2020, JPMorgan has been releasing its reserves all the time, which has contributed to strong performance. But in the 1st quarter of 2022, the company had to replenish these reserves by almost a billion.The impact of the Russian-Ukrainian conflict. Due to increased volatility and correction in the markets, some banks are experiencing a decrease in profits in the trading and investment banking departments.At the same time, the demand for mortgages has decreased significantly, which also puts pressure on banks.And what about investment banks?JPMorgan, Goldman Sachs and Morgan Stanley have greatly exceeded analysts' expectations in both profit and revenue. This was facilitated by the increased volatility of the markets against the background of Ukraine. In addition, these companies do not need to allocate a large share to reserves due to the specifics of their business. However, they are still under pressure in price due to problems in other segments, for example, in underwriting.What awaits the US banking sector in the near future?Since the beginning of the year, the banking sector has sunk by more than 15%. Investors are afraid of a correction in stock markets due to an increase in the key rate, as well as due to geopolitical problems. Banks are also nervous and raising reserves.Investment banks now look more attractive than their competitors in the sector. But everything depends on further events. The market may react to a serious increase in rates by reducing the value of shares. After all, unlike commodity companies, banks cannot play off all inflationary risks and are highly dependent on the state of the global ...

Investment bank The Goldman Sachs Group, Inc. (GS) reported for the fourth quarter of 2021 an increase in diluted earnings per share by 8% YoY, to $12.64, with a consensus of $12.08. Net profit of the corporation decreased by 12.67% and amounted to $3.94 billion, which was due to an increase in operating expenses by 23% YoY, to $7.27 billion, including compensation, as well as investments in development and technology. The volume of reserves to cover possible credit losses in the reporting period increased by 15% QoQ (+$344 billion) due to an increase in the volume of credit card balances on the balance sheet. By the end of the year, the reserves of The Goldman Sachs under the OKU amounted to $ 4.35 billion, the cost of risk decreased from last year's 2.67% to 0.23%.Net revenue of The Goldman Sachs for the fourth quarter increased by 7.6% YoY, reaching $12.64 billion with a market-wide forecast of $12.04 billion. Unlike other major banks, Goldman Sachs managed to increase net interest income by 27% YoY, to $1.79 billion, by reducing interest expenses by 22% YoY. Non-interest income of the financial corporation for October-December increased by 4.9% YoY, $10.84 billion, mainly due to an increase in revenues from the investment Banking segment by 45% YoY, to $3.8 billion, increased income from underwriting by 20% YoY, to $1.97 billion. The growth (+80% YoY) was particularly active in the sub-segment of the bond placement support (Debt Underwriting). Revenues from financial advice rose by 49% YoY, to $1.6 billion due to an increase in the number of completed M&A transactions. Income from Investment Management increased by 21% YoY, to $2.2 billion, and from marketmaking - decreased by 18% YoY, to $2.2 billion.Net revenue from capital markets (Global Markets) decreased by 7% YoY, to $3.98 billion, from asset Management (Asset Management) decreased by 10% YoY, to $2.89 billion, due to one-time transactions, such as market revaluation of investments in stocks and fixed income instruments. In the segment of servicing individuals and private capital management (Consumer & Wealth Management) revenue increased by 19% to $1.97 billion.By the end of 2021, the total revenue of The Goldman Sachs rose by 33% YoY, reaching $59.34 billion, net profit increased by 129% to $21.63 billion. This allowed the corporation to improve the return on equity ROE by a significant 11 bps year-on-year, up to 20%. The Goldman Sachs compares favorably with its direct competitors with an insignificant loan portfolio (10.8% of total assets) and a higher share capital: The CET1 capital adequacy ratio is still a solid 14.2%, despite a decrease of 5 bps compared to the previous year. Thanks to this, the corporation is able to consistently pay dividends and launch a share repurchase program.Our base target price for GS stock on the horizon of the year is $456. At the moment, the issuer is fairly valued by the market. Increased exchange activity in 2021 allowed the bank to show strong financial results, however, we believe that last year's trends will slow down, and the flow of liquidity in the markets will weaken, which will lead to a decrease in the growth rate of financial indicators of the banking sector. If a bearish trend develops, Goldman Sachs quotes will drop $360. If an optimistic scenario is realized, the stock can rise in price to $ ...

The market the day beforeOn January 10, the main American stock indexes ended trading mainly in the red zone. The S&P 500 dropped 0.14% to 4,670 points, the Dow Jones lost 0.45%, the Nasdaq did not show significant dynamics, adding 0.05%. Almost all sectors included in the S&P 500 closed in the red. The exceptions were issuers of the healthcare industry (+1.04%), technology companies (+0.10%) and telecoms (+0.02%). Raw materials (-0.99%) and industrial companies (-1.15%) looked worse than the market.Company newsTake-Two Interactive (TTWO: -13.1%) announced the takeover of Zynga (ZNGA: +40.7%).BHP Group (BHP: -1.88%) has announced plans to invest $40 million in the Kabanga Nickel sulfide deposit in Tanzania.Bristol-Myers Squibb Pharmaceutical Company (BMY: +3.61%) predicts a decrease in revenue from the sale of Revlimid, the best-selling drug in its portfolio, in 2022.ExpectationsThe season of publishing results for the fourth quarter continues, but more and more companies are presenting weaker reports compared to previous periods. In particular, according to FactSet, at the moment the number of issuers predicting negative EPS values exceeds the same indicator for any quarter starting from 2020. Goldman Sachs experts are convinced that it will be most difficult for companies with high labor costs and/or exposed to wage inflation to maintain profitability. At the same time, the strategists of the investment house believe that the rate of wage increases will decrease to 4% compared to 4.7% YoY in December, and the Fed may begin to reduce the balance sheet no later than July and raise interest rates four times this year. These factors speak in favor of the greater attractiveness of "value" companies compared to "growth" securities, and also indicate that the sale of issuers' shares, which will begin to generate profit steadily no earlier than in a few years, is likely to continue.The yield on two-year Treasury bonds increased by 4 basis points (bp) to 0.90%. The same indicator for the "ten-year-olds" reached 1.81% during the day, and by the close of the session it was 1.78%, which is 1 bp higher than Friday's level. These factors indicate an increase in investor concerns about the imminent rate hike.Most of the sites in Southeast Asia ended trading on January 10 in the red zone. China's CSI 300 declined by 0.96%, Japan's Nikkei 225 fell by 0.90%, Hong Kong's Hang Seng lost 0.03%. EuroStoxx 50 has been growing by 0.89% since the opening of the session.Brent crude futures are quoted at $80.8 per barrel. Gold is trading at $1,798.4 per troy ounce.In our opinion, the S&P 500 will hold the upcoming session in the range of 4630-4680 points.MacrostatisticsNo significant macro statistics are expected to be published today.Technical pictureThe S&P 500 is still falling towards the lower boundary of the ascending channel. The nearest resistance for the index is near the 50-day moving average. The RSI is also moving below 50 points closer to the oversold zone, the MACD indicator signals a possible continuation of the downward trend, which together indicates a correction of the indices in the upcoming ...

Goldman Sachs Group is the world's largest investment bank, a financial conglomerate that engages in investment banking, securities trading, capital management and provides other financial services, primarily to institutional clients.In October, the issuer reported for the 3rd quarter of 2021. According to the report, the company's net revenue increased by 26.1%, reaching $13.6 billion. If compared with the 2nd quarter of 2021, the indicator decreased by 11.6%. Adjusted earnings per share, taking into account, amounted to $14.90, whereas in 2020 for the same period it was around $8.98. The bank's profitability was 23.8%.In October, we predicted the growth of the paper towards $460 after the breakdown of the $390 level. Unfortunately, the buyers did not have enough strength for a long time. They managed to raise the price only to the $425 mark, after which they again lost the market to sellers who sent the asset to the $367 area.The decline is caused by the general market sentiment, and, apparently, this mood will not remain bad for the paper for a long time. Investors are looking forward to the beginning of the curtailment of the QE program in the US and the beginning of a rate hike. Higher rates will lead to a wider net interest margin, which will only benefit the company's banking business.We would not risk buying this paper now until the situation with Omicron has cleared up. This uncertainty may cause a new wave of decline. Only after returning to the area of $385-$390, it will be possible to start cautiously buying the asset. The main target of buyers remains the annual maximum - the area of $ ...

The spread of a new strain of coronavirus in China and the introduction of restrictive measures have led to a revision of the forecast for the country's economy by experts at Goldman Sachs. They now expect China to end the current quarter with only 2.3% gross domestic product growth over the previous three months. Earlier, the bank's experts predicted the country's economic growth in the third quarter by 5.8%. The forecast for the annual GDP growth rate was reduced by 0.3 percentage points to 8.3%. At the same time, Goldman Sachs experts believe that the Chinese authorities will be able to take control of the epidemiological situation. And in the last quarter of this year, economic activity in the country will grow sharply. In this regard, the forecast for Chinese GDP growth in October-December was raised to 8.5%. According to the previous forecast, economic growth was expected at 5.8%. However, the state media in China writes that in the third and fourth quarters, the economy is likely to grow by 6.3% and 5%, ...

The first quarter was the best in the company's history for Goldman Sachs, and economic indicators are primarily profit forecasts. The investment bank received $6.8 billion, or $18.60 per share. Total revenue reached $17.7 billion. Analysts had expected Goldman Sachs' earnings per share to be just $10.22.Currently, the company is mainly engaged in investment banking and trading, both of which are very volatile. In the context of the pandemic, the activity of most investment banks has increased, but as for Goldman Sachs, we can expect that income and profit levels will remain above pre-pandemic levels.The company's services include investment and securities management, as well as brokerage and underwriting services. The company is a major dealer on the US Stock Exchange.The success of Goldman SachsMost of Goldman Sachs' competitors suffered during the pandemic. But, as one of the largest investment banks in the United States, Goldman managed to stay out of the negative zone, its shares rose by 20% in 2020. Earnings per share also increased by 17.6% to $24.74 for the year. Revenue also increased by 22% to $44.5 billion.There are several reasons why last year's results were the best for the company. First, the bank did not have to spend large amounts of money to cover the expected credit losses due to the fact that the size of its credit banking division is significantly smaller than that of other banks, especially Bank of America. The latter had to allocate $11 billion for these purposes, while Goldman Sachs limited itself to $3 billion.In addition, the year was positive for the bank in other business areas. These are investment banking and global markets, which are the bank's institutional trading arm. Investment banking activity has been growing over the past year. And this was reflected in an increase in the number of mergers and acquisitions between US companies, and the level of income from underwriting shares and debt obligations was at an all-time high.The revenue of the Global Markets division increased by 43% to $21.2 billion, which is a record for a decade. This is largely due to instability and a large volume of trading on the securities market.Small businesses in wealth and consumer management, as well as capital management, also experienced revenue growth. The growth of deposits using the Marcus digital banking platform was 62%, which also allowed the banking division to increase revenues.In 2020, the bank also began providing transactional banking services to corporations and financial institutions, which will contribute to the diversification of expenses in the future.Goldman Sachs and "pacifiers”The bank's higher normalized revenue was probably supported by the comments on SPAC. These are shell companies that seek to obtain public status with the sole purpose of merging with a private company so that it becomes public within about 2 years. Many banks took on the role of SPAC underwriters and made huge profits. Data from SPAC Research shows that in 2020, the number of SPAC listings was 248, and in 2021 – 300. But then regulators began to carefully check such companies, which led to a decrease in the number of their listings.According to experts, we should expect further development of the industry while maintaining SPAC, which will allow companies to enter the public market. Goldman's share in the SPAC market is quite large, but this did not have a significant impact on the overall activity of the bank.Economists estimated this segment in the total volume of mergers and acquisitions conducted during the quarter as unambiguous. They also noted that this indicator was below 15% of the capital markets growth in the last quarter. However, it is likely that the bank will continue to receive significant benefits from the activities of SPAC, given that incentives in this area will continue.At the same time, the potential of Goldman Sachs in consumer banking is still small, given that it is a new business. About five years ago, the issuer launched the Marcus loan and savings platform, which turned out to be very successful. The size of their deposit base may exceed $50 billion.Return to Credit cardsNot so long ago, the company started providing credit card lending services, and the best solution for the bank was to cooperate with Apple. The bank also assumed the role of GM's credit card issuer. This business is growing very fast: this figure has reached 32% in a year. But the share of consumer banking services in the bank's total revenue was only 2%, which is very small compared, for example, with Bank of America and other large banks.Although the bank is not currently going to fall into your hands in the consumer banking segment, in the long term the potential is very significant. It may take the bank about ten years to do this.It should be noted that the Goldman Sachs brand is the most recognizable brand in the banking sector, and its cost structure corresponds to the Internet banking model, since there are no branches that require financial support and other "charms" of ordinary banks. At the same time, it is comparable to SoFi in terms of profitability, but its brand is more recognizable. Thus, the company has a huge competitive advantage and no less significant ambitions.A robotic consumer consulting service was recently launched, and the company plans to expand its current account and mortgage services. At the same time, Goldman Sachs can soar even higher, which many do not think about yet.The company's shares are preparing to return to growth. The first wave of growth ended at $ 380, from which the price rolled back to $355, where there was a rebound and growth to the area of $370. We expect that this stock will have a high growth potential, and we will strive to return to the year-round high of $390. But this height is not the limit for the bank's shares. We think that this year they have every chance to visit the region for ...