The Fed may not move on that timeline or inflation may rise again, compelling it to hold rates higher. A recession lowers rates. Goldman, which suffered in 2023 owing to the worst dealmaking year in a decade, is best prepared for a comeback. Solomon, the company's CEO, is under pressure to cut consumer lending while focusing on trade, asset management, and investment banking.
A change in Federal Reserve monetary policy may finally lead to a bonafide improvement in investment banking conditions which would provide a much-needed tailwind" for Goldman, RBC banking analyst Gerard Cassidy said Tuesday.
Solomon told analysts that "I do think you're gonna see some more meaningful IPOs in 2024 and just across debt and equity issuance see more activity and more engagement." He said Goldman "is incredibly well levered to this pickup.
Wall Street operations are difficult to predict since CEO confidence is affected by economic, geopolitical, and company uncertainty. However, volatility and whether trading desks respond on market fluctuations influence trade. This volatility may be very beneficial or expensive.
The five main banks with large trading desks witnessed double-digit declines in stocks and fixed income revenue from the third quarter, especially fixed income trading. Citigroup saw the biggest reductions, 19% year-over-year and 29% quarter-over-quarter.
"We're seeing improved confidence among CEOs," Citigroup CFO Mark Mason said Friday. "Of course, the timing for a robust recovery is uncertain," he said.
Morgan Stanley also hopes for a 2024 trade resurgence and investment banking momentum. Pick, who became CEO on Jan. 1, said the business expects a "benign soft landing" for the US economy.
If the economy slows severely in the coming quarters and the Fed must drop rates quickly, "activity levels and asset prices would likely be lower." Higher interest rates for longer will raise capital expenses if inflation continues. Early in 2024, those risks create uncertainty, he added. "We remain constructive on the year ahead."