Your Portfolios in Brief
Created in 1869, Goldman Sachs (GS) is a major global financial institution specializing in investment banking, securities and asset management, and financial services. With a presence in over 30 countries and approximately 40,500 employees, the company plays a central role in global financial markets.
Key Highlights in 2024
• Exceptional Financial Results: Goldman Sachs reported an annual net income of $14.28 billion, a 68% increase compared to the previous year. In the fourth quarter, earnings per share reached $11.95, significantly surpassing analysts’ expectations.
• Strong Growth in Investment Division: Revenue from trading activities hit a record $13.4 billion for the year, while fixed-income operations generated $2.74 billion in the last quarter, driven by gains in credit products and currencies.
• Asset and Wealth Management: With an 8% increase in revenue and assets under management exceeding $3.1 trillion, this division remains a key growth driver.
• Strategic Reorganization: The company restructured its operations by creating a new division called the “Capital Solutions Group,” enhancing its capabilities in financing and capital-raising solutions.
Why It’s a Stock to Watch
Goldman Sachs has met or exceeded most of the strategic goals set five years ago, according to CEO David Solomon. The bank has benefited from renewed confidence among corporate executives and increased activity from private equity firms, supported by the Federal Reserve’s potential rate cuts and a more favourable regulatory environment.
These factors, coupled with a significant rebound in mergers and acquisitions and increased activity in equity and bond markets, boosted the bank’s results in the second half of 2024. Goldman Sachs also achieved substantial gains through equity investments, particularly from strategic initiatives aimed at reducing its reliance on balance sheet investing while promoting third-party placements. These efforts doubled equity investment revenues compared to analysts’ forecasts, demonstrating the success of this strategic shift.
Conclusion
At Pratte Portfolio Management, we firmly believe in the potential of Goldman Sachs. Its financial strength, strategic innovations, and consistent performance make it a cornerstone of our portfolio. We are confident in the company’s resilience and its ability to adapt to changing market conditions. The exceptional performance of its trading activities and strategic reorganization are hailed as decisive steps in maintaining its leadership. Investors consider the stock attractive for both its current valuation and long-term growth prospects.
Goldman Sachs ended 2024 with the best performance among major U.S. banks, up 48%. Investors are now closely watching the results to evaluate whether the bank can sustain this momentum. After refocusing its activities by exiting some consumer-facing projects, Goldman Sachs is positioning itself for a long-anticipated return to mergers and acquisitions. We are confident this strategy will further enhance its growth and cement its key role in our portfolio.
Markets in Brief
Monday
• Dow: Despite a 0.86% increase to 42,297.12 points, primarily supported by gains in the industrial and financial sectors, the index remains down on a weekly basis.
• NASDAQ: The tech-heavy NASDAQ fell 0.38% to close at 19,088.10 points.
• S&P 500: The broader index edged up 0.16% to 5,836.22 points, driven by gains in the energy and materials sectors.
Markets ended mixed on Monday as investors awaited key upcoming economic data, including the Consumer Price Index (CPI) and Producer Price Index (PPI), which could offer insights into the Federal Reserve’s next moves.
Large tech companies, which have led the bull market in recent years, continued to face pressure, mainly due to rising bond yields.
Rotation into Defensive Sectors
Investors shifted their portfolios toward sectors considered more resilient amid economic uncertainties.
• Energy: This sector rose more than 2%, supported by higher crude oil prices.
• Health Care: Johnson & Johnson (+1.70%) boosted the sector with its announcement of acquiring Intra-Cellular Therapies (+34.07%).
• Industrials: Caterpillar (+1.5%) and JPMorgan (+1.2%) recorded notable gains, supporting the Dow.
Rising Bond Yields
Treasury yields climbed to elevated levels, fuelling fears of prolonged pressure on growth stocks.
• 10-Year Treasury Yield: Rose to 4.79%, its highest level since 2023.
• These increases reflect expectations of persistent inflation, dampening hopes for swift Fed rate cuts.
Stocks in Brief
• Intra-Cellular Therapies (+34.07%): Announced acquisition by Johnson & Johnson for $14.6 billion.
• Moderna (-16.80%): Plunged following downward revenue guidance revisions.
• Abercrombie & Fitch (-15.20%): Dropped despite encouraging forecasts, due to profit taking.
• Nvidia (-1.97%): Impacted by U.S. restrictions on tech exports.
• Palantir (-3%) and Apple (-1.5%): Continued pressure on tech stocks.
• Toronto Stock Exchange (-0.93%): The S&P/TSX fell 231.41 points to 24,536.32, weighed down by energy, tech, and utilities sectors.
• Canadian Dollar (+0.07%): Averaged 69.39 cents USD, up from 69.34 cents USD last Friday.
Tuesday
• Dow: Rose 0.52% to close at 42,518.28 points, supported by gains in the financial services and materials sectors.
• NASDAQ: Declined 0.23% to 19,044.39 points due to ongoing pressure on tech stocks.
• S&P 500: Added 0.11%, closing at 5,842.91 points, aided by defensive sectors such as utilities.
Impact of Economic Data
The December Producer Price Index (PPI) report showed a 0.2% increase, below expectations of 0.4%. Initially welcomed by investors as a sign of moderate inflationary pressures, attention now turns to the Consumer Price Index (CPI) report due Wednesday, which could shape expectations for future Federal Reserve decisions.
Sector Rotation
• Technology: Continued under pressure, with Nvidia down 1.1% and Meta Platforms losing 2.3%.
• Financial Services and Materials: These sectors outperformed, each gaining over 1%. The SPDR S&P Regional Bank ETF (KRE) and SPDR S&P Bank ETF (KBE) both surged 3%.
• Utilities: Defensive investments supported the S&P 500.
Stocks in Brief
• Alibaba (+1.42%), PDD (+2.24%), JD.com (+4.04%): Chinese stocks gained amid speculation that U.S. tariff increases may be gradual.
• Eli Lilly (-6.59%): Dropped significantly after issuing below-expectation revenue forecasts for 2024.
• Macy’s (-3.71%): Continued decline after weaker-than-expected Q4 results.
• Nvidia (-1.1%) and Meta Platforms (-2.3%): Ongoing pressures on tech stocks.
• Toronto Stock Exchange (+0.21%): The S&P/TSX rose 52.26 points to 24,588.58, bolstered by gains in materials.
• Canadian Dollar (+0.27%): Averaged 69.58 cents USD, up from 69.39 cents USD on Monday.
• Crude Oil (-1.21%): Fell by 93 cents to $76.37 USD per barrel.
• Natural Gas (+1.02%): Gained 4 cents to $3.97 USD per million BTU.
• Gold (+0.14%) and Copper (+0.23%): Gold rose by $3.70 USD to $2,682.30 USD per ounce, while copper added one cent to $4.34 USD per pound.
Wednesday
• Dow: The Dow rose by 1.65%, closing at 43,221.55 points, driven by strong bank earnings and favourable economic data.
• NASDAQ: The tech-heavy NASDAQ surged 2.45%, ending at 19,511.23 points, supported by a rebound in major technology stocks.
• S&P 500: The broader index gained 1.83%, closing at 5,949.91 points, reflecting positive performance across most sectors.
Favourable Economic Data
The December Consumer Price Index (CPI) showed an annual increase of 2.9%, in line with expectations, but a monthly deceleration in core inflation to 0.2%, signalling easing inflationary pressures. This development bolsters expectations for accommodative monetary policy from the Federal Reserve.
Markets welcomed the recent inflation indicators, with both the Producer Price Index (PPI) and Consumer Price Index (CPI) coming in slightly below forecasts. According to John Kerschner, Head of U.S. Securitized Products at Janus Henderson Investors, the CPI figure in particular diminishes the likelihood of further Federal Reserve rate hikes, which some investors had prematurely anticipated. This development potentially paves the way for interest rate cuts in the first half of the year.
Strong Banking Sector Earnings
Major U.S. banks reported better-than-expected quarterly results, supported by robust performances in market operations and investment banking. These announcements boosted investor confidence in economic stability.
Stocks in Brief
• Tesla (+8.04%): The electric vehicle maker’s stock soared following an upgrade from Barclays.
• Wells Fargo (+6.69%), Citigroup (+6.49%), Goldman Sachs (+6.02%), JPMorgan Chase (+1.97%): Banks posted significant gains after strong quarterly earnings.
• BlackRock (+5.19%): The asset manager surged after announcing record-breaking Q4 and full year 2024 results.
• S&P/TSX Composite Index (+0.82%): The Toronto Stock Exchange gained 200.72 points to close at 24,789.30, supported by information technology, financials, and base metals sectors.
• Canadian Dollar: The dollar traded at 69.76 cents USD, up from 69.58 cents USD on Tuesday.
• Crude Oil (+3.06%): Prices increased by $2.34 USD, reaching $78.71 USD per barrel.
• Natural Gas (+2.77%): Prices rose by 11 cents USD, settling at $4.08 USD per million BTU.
• Gold (+1.32%): The precious metal added $35.50 USD, closing at $2,717.80 USD per ounce.
• Copper (+1.15%): Prices rose by 5 cents USD, reaching $4.39 USD per pound.
Thursday
• Dow: The Dow fell 0.16%, closing at 43,153.13 points, weighed down by losses in large-cap technology stocks.
• NASDAQ: The tech-heavy NASDAQ dropped 0.89%, ending at 19,338.29 points, with major tech names under pressure.
• S&P 500: The broader index slipped 0.21%, closing at 5,937.34 points, breaking a three-day winning streak.
Big Tech Drags the Market
The “Magnificent Seven” tech giants all declined
• Apple (-4.04%): Suffered its worst day since August 5 after losing its top spot in China’s smartphone market to Huawei and Vivo.
• Tesla (-3.36%): Fell sharply amid broader tech sector weakness.
• Nvidia (-1.92%): Continued to retreat after recent strong performances.
• Alphabet (-1.30%), Amazon (-1.20%), Microsoft (-0.41%), and Meta (-0.94%) also closed lower.
The pullback in tech stocks overshadowed earlier gains fuelled by strong corporate earnings and optimistic sentiment from Wednesday’s rally.
Economic Data and Treasury Yields
• Retail Sales: December retail sales rose by 0.4%, slightly below the 0.5% expected.
• Jobless Claims: Initial unemployment claims came in at 217,000, slightly higher than the 210,000 forecast.
• Treasury Yields: The 10-year U.S. Treasury yield eased to 4.61% from 4.65% on Wednesday, reflecting moderate inflation expectations.
Bank Earnings Mixed
U.S. banks posted mixed results despite strong quarterly earnings overall:
• Morgan Stanley (+4.03%): Surged after reporting robust Q4 results, driven by equity trading.
• Bank of America (-0.98%): Declined despite exceeding earnings expectations, citing weaker momentum in key segments.
Stocks in Brief
• UnitedHealth (-6.04%): Dropped sharply after reporting higher medical costs and weaker-than-expected revenue, compounded by operational challenges.
• S&P/TSX Composite Index (+0.23%): The Toronto Stock Exchange gained 56.90 points to close at 24,846.20, supported by tech and utilities sectors.
• Canadian Dollar (-0.37%): Traded at 69.50 cents USD, down from 69.76 cents USD on Wednesday.
• Crude Oil (-1.09%): Fell by 86 cents to $77.85 USD per barrel.
• Natural Gas (+4.41%): Jumped by 18 cents to $4.26 USD per million BTU.
• Gold (+1.22%): Added $33.10 USD, closing at $2,750.90 USD per ounce.
• Copper (+1.14%): Gained 5 cents USD, settling at $4.44 USD per pound.
Friday
• Dow: At the start of the session, the Dow gained 0.7%, or 324 points, reaching 43,477.13 points.
• NASDAQ: The tech-heavy NASDAQ advanced 1.6%, reaching 19,645.29 points, driven by a strong rebound in tech stocks.
• S&P 500: The broader index climbed 0.8%, reaching 5,984.03 points, continuing its upward trend for the week.
Big Tech on the Rise
Tech stocks fuelled the market rebound:
• Tesla (+3.0%): Soared due to increased investor interest in tech stocks.
• Nvidia (+2.0%): Continued its rise, benefiting from strong prospects in the semiconductor sector.
• Meta Platforms (+1.3%) and Alphabet (+1.1%): Also posted significant gains.
Conclusion
The Dow and S&P 500 are up 3.6% and 2.7%, respectively, for the week, marking their best weekly performance since the presidential election in November. The NASDAQ Composite is up 2.4%, its best week since early December.
Markets remain optimistic, supported by favourable economic outlooks, solid corporate earnings, and easing inflationary pressures. Attention now turns to Donald Trump’s inauguration on Monday.
