A surge in trading activity amid investor uncertainty about President Trump’s policies has brought big profits to Goldman Sachs and other big banks.
The Wall Street firm, along with JPMorgan Chase & Co. and Morgan Stanley, reported a rise in first-quarter profits, helped by record revenue in its stock trading and lending divisions. The bank has reaped the rewards of a bump in fees as investors adjust their portfolios in anticipation of a market hit from Trump’s trade and other economic policies.
“There are growing signs that global economic activity is slowing and the odds of a recession have increased,” Goldman Chief Executive David Solomon said on a call with analysts Monday.
Goldman’s board approved up to $40 billion in stock buybacks in the first quarter, a move Solomon said would give the firm greater flexibility to manage capital.
The bank’s big profits came before Trump’s full implementation of his “Liberation Day” tariffs sparked market turmoil and subsequent confusion about how to enforce them. Wall Street executives have warned that Trump’s tariffs are pushing the economy into the unknown and they can’t be sure how his moves will affect their businesses.
Goldman Sachs’ profit rose 15% to $4.74 billion, or $14.12 per share, in the first quarter of this year, easily beating analysts’ expectations.
Revenue rose 6% to $15.06 billion, also beating expectations. The increase in trading revenue was mainly due to a strong 27% increase in the bank’s equities business, which includes trading and lending to trading clients.
Goldman Sachs said that equity derivatives revenue was particularly high as investors looked to prepare for volatility.
At the beginning of the year, many investors’ portfolios were betting on the continuation or acceleration of the “American exceptionalism” trade, bank executives said. Now, many clients are looking to reduce their exposure to U.S. stocks and the dollar and hold international assets including Europe and South America.
Solomon said on a conference call with analysts that the company was encouraged by recent signs that the U.S. government plans to adopt a more gradual tariff policy. But he said that clients’ concerns about the near-term and long-term outlook limited their ability to make important decisions. “This uncertainty about the future direction and concerns about the impact of a possible escalation in the trade war pose significant risks to the U.S. and global economies,” he said.
Stock market volatility and uncertainty about the global economy have led many companies to pause mergers and initial public offerings.
Goldman Sachs’ investment banking revenue fell 8% in the first quarter, dragged down by a 22% drop in advisory fees. The firm said its deal backlog increased from the previous quarter.
Bankers spent the weekend on calls with corporate CEOs to explore the degree of stability that markets need before IPOs and other deals can proceed. A senior Goldman banker said there needs to be fewer headlines that would reset global trade.
Morgan Stanley CEO Ted Peake said Friday that some clients have paused trades but have not canceled them, and the firm expects more clarity by mid-year.
