Goldman Sachs (GS, Financial) is set to benefit significantly from the growth in private credit and alternative assets. With anticipated regulatory leniency on private credit during Trump's administration, Goldman Sachs stands to gain over the next several years. Additionally, rising Treasury yields may bolster the private credit sector.
Since Trump's election, enthusiasm for trading activities, regulatory easing, and private credit has increased, driving a strong performance for Goldman Sachs. In November, Goldman Sachs emerged as the best-performing global bank in the S&P 500, with a nearly 15% increase, outperforming the roughly 9% rise in the S&P 500 Bank Index.
Goldman Sachs is expected to take advantage of increased M&A and IPO activities as well as regulatory relaxation. Historically, during boom periods on Wall Street, Goldman Sachs has excelled, evidenced by a 23% return on equity in 2021, compared to the S&P 500 Bank Index’s overall return of 12%.
Analysts predict that under Trump’s leadership, new regulatory bodies may not restrict relatively illiquid private credit investments for ordinary investors, a factor contributing to expected growth in private credit. Rising Treasury yields could particularly benefit asset-backed financing sectors.
Goldman Sachs' strategic shift focuses on investing through funds for clients rather than using its own capital, reducing capital intensity and increasing stable management fee income. By the third quarter, Goldman managed about $140 billion in private credit assets, with continued expansion into fast-growing markets like asset-backed securities.
The firm is poised to increase its pre-tax profits in its asset and wealth management sectors by leveraging this strategy. However, analysts caution that potential tariffs imposed by Trump on large multinational companies could widen credit spreads or slow client activity. Policy uncertainties or unexpected presidential announcements might lead to excessive market volatility, complicating financing efforts. Regulatory changes may also not always meet expectations.
