Leading the rise in overseas bank stocks, Goldman Sachs is the real big winner of the Trump trade?

Since Trump's election, the market's expectations for trading activities, regulatory easing, and private credit have heated up, with favorable factors continuously accumulating, driving Goldman Sachs into a "harvest season." In November, Goldman Sachs topped the S&P 500 index as the best-performing global bank, with an increase of nearly 15%, far exceeding the S&P 500 bank index's increase of about 9%, and matching the increase of private equity giant Apollo this month. According to The Wall Street Journal, Goldman Sachs's performance may not be coincidental. Like other Wall Street banks, Goldman Sachs will benefit from increased M&A and IPO activities as well as regulatory relaxations. Moreover, during prosperous times on Wall Street, Goldman Sachs typically performs well: in 2021, during a surge in trading activities, its annual return on equity reached 23%, while the overall return of the S&P 500 bank index was only 12%. However, due to the significant growth of private credit and alternative assets, Goldman Sachs may become a potential big winner among these banks. Analysts believe that under the Trump administration, new securities regulatory agencies or systemic risk regulatory agencies may be less inclined to restrict the availability of relatively illiquid private credit investments to everyday investors or view them as a source of financial risk. TD Cowen's Washington Research Group analyst Jaret Seiberg stated: “We expect that there will be no restrictions on private credit during the Trump administration, which is also why we believe private credit will continue to grow over the next four years.” Another reason is: the rise in government bond yields may be beneficial for private credit, especially in rapidly growing areas such as asset-backed financing (ABF). Moody's Senior Vice President of Private Credit Mark Wasden stated, “The rise in government bond yields will affect the interest rates of long-term assets (following suit).” Although other large Wall Street banks are also involved in private credit, analysts believe that Goldman Sachs's ongoing strategic shift may allow it to gain greater benefits than others. In its recent strategy, Goldman Sachs has shifted its asset management department from betting on its own capital to making more investments for clients through funds. The latter has a lower capital intensity and can generate stable management fee income. As of the third quarter, Goldman Sachs managed approximately $140 billion in private credit assets and continues to enter rapidly growing areas of this market, such as asset-backed securities (ABS). This also means that Goldman Sachs can further expand its pre-tax profits in its asset and wealth management department by charging more fees. However, some analysts warn that if tariffs implemented by Trump put pressure on large multinational companies, it could widen credit spreads or slow down client activities. Policy uncertainty or excessive market volatility caused by unexpected presidential statements, combined with rapidly rising interest rates, could make financing more difficult. Additionally, regulatory changes may not always align with expectations