Donald Trump’s victory in the US presidential elections saw bank stocks rip as investors expect Trump’s policies, including tax cuts and lighter regulation, to drive economic growth and boost bank stocks.
Goldman Sachs Group and Morgan Stanley shares are showing an “unattractive risk reward profile” in the wake of the recent bank rally, HSBC analysts said, adding that investors should be wary of arguments that an investment banking “supercycle” will drives shares much higher.
The analysts lead by Saul Martinez said that while investment banking fees likely will increase, their estimates for Goldman Sachs and Morgan Stanley already factor in around a 30% increase from 2024 levels. “We think market expectations are much higher than they have been, leaving room for disappointment,” Martinez said in a note, downgrading both banks to hold from outperform.
