Something strange has happened. Despite widespread expectations that a Trump presidency would cause problems for investment banks, bank stocks ended yesterday up. And not just a little big – significantly up, in some cases.
Morgan Stanley’s stock was up 6% yesterday. So was J.P. Morgan’s, which hit an all-time high. Goldman’s stock hit a 52 week-high. The KBW bank stock index rose by nearly 5.5% to its highest level since August 2015. Only Citi floundered, and that was seemingly because of its links with Mexico, whose economy could be damaged by the promised ‘wall.’
So, what makes Trump so hot for banks? Vanity Fair lays it out plain and simple. Firstly, Trump equals lower taxes. Secondly, Trump equals the repatriation of overseas profits during a tax amnesty. Thirdly, Trump equals the repeal of Dodd-Frank and therefore the Volcker Rule, hopefully allowing for the resurrection of profitable prop traders like the one who made $100m in profits for Goldman Sachs earlier this year. Fourthly, Trump equals big infrastructure investments as part of a promised $5 trillion spending programme, and banks just might benefit from that. And fifthly, the election of Trump instead of Hillary Clinton will greatly weaken awkward Democratic pro-regulation types like senator Elizabeth Warren and Federal Reserve Governor Daniel Tarullo.
In combination, these factors are leading to unexpected ebullience around banking stocks. Naturally, there’s still the potential that things won’t go to plan. Trump has also promised to separate investment banking from commercial banking and to remove tax breaks on the carried interest paid by private equity funds. For the moment though, these flies are being ignored. The Trump ointment looks pretty good, and bank investors are getting excited about its application.
Separately, after much hemming and hawing Goldman Sachs announced its biggest partner list since 2010. Only one of our nine predicted partner promotes – Carey Halio was on it, suggesting we wouldn’t do too well as one of those octopuses or goats that reads the future. Someone who was on the list and whose presence we hadn’t foreseen, was Sam Morgan, a 33 year-old Cambridge educated London fixed income salesman with a premature ‘partner beard.’ Morgan is just an “awesome guy” according to Business Insider; he gives clients what they really want instead of luring them with fancy tricks.
Trump is president. As he goes to the stage to speak, only one voice on the trading foor is heard whispering “Jesus Christ”. (Evening Standard)
Jamie Dimon: “I’m optimistic about America’s future and the role our company will continue to play as we help the nation address our challenges and move forward together.“ (Business Insider)
During the campaign, a group of bankers from around the country — plane tickets in hand — were looking forward to meeting the candidate in the flesh at Trump Tower in midtown Manhattan. But at the last minute, Trump canceled and decided to spend his time elsewhere. (Bloomberg)
Goldman also promoted eight people from non-revenue producing departments, including legal and compliance, up from none two years ago. (Financial Times)
Nineteen of the new Goldman Sachs partners — or about 23%– are women, the highest proportion and most ever. When Goldman went public in 1998 only 6% of partners were women, (Bloomberg)
“There is a non-zero chance that people who were analysts when I first met them at Goldman are now up for partner. It is enough to make one feel both old and poor.” (Bloomberg)
City banks that had planned to move operations to the US or the continent should wait to see which way Trump jumps and whether populism will now ripple through the EU. (Financial Times)
David Kelly, chief global strategist at JPMorgan Asset Management, said he expected Trump to be less aggressive and more pragmatic than he had pledged during the campaign. (Guardian)
Trump also has signaled that he would consider allowing more high-skilled immigration. (Bloomberg)
Goldman Sachs is seriously thinking about moving some London staff to Frankfurt. (Reuters)