After the Trump Trade: The Future of Financials

Goldman Sachs Exchanges

Julia McGonagle

Business

4.4 • 1K Ratings

🗓️ 12 December 2016

⏱️ 18 minutes

🔗️ Recording | iTunes | RSS

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Summary

Investors have flocked to financials since Donald Trump's election in expectation of a steepening yield curve and regulatory reform boosting bank bottom lines. Richard Ramsden, business unit leader of the Financials Group in Goldman Sachs Research, explains how tightening monetary policy, higher inflation and a potential infrastructure spend could be even more important for the trajectory of the US financial industry. This podcast was recorded on December 8, 2016. All price references and market forecasts correspond to the date of this recording. This podcast should not be copied, distributed, published or reproduced, in whole or in part. The information contained in this podcast does not constitute research or a recommendation from any Goldman Sachs entity to the listener. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, as to the accuracy or completeness of the statements or any information contained in this podcast and any liability therefor (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed. The views expressed in this podcast are not necessarily those of Goldman Sachs, and Goldman Sachs is not providing any financial, economic, legal, accounting or tax advice or recommendations in this podcast. In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by Goldman Sachs to that listener, nor to constitute such person a client of any Goldman Sachs entity.

Transcript

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0:00.0	This is Exchanges at Goldman Sachs, where we discuss developments currently shaping markets, industries, and the global economy.
0:14.8	I'm Jake Seward, Global Head of Corporate Communications here at the firm.
0:18.2	The companies that comprise the S&P 500 Financials Index have benefited from a dramatic uptick in investor sentiment since the election of Donald Trump to the US presidency on November 8th.
0:28.0	My guest today, Richard Ramston, oversaw that just concluded Goldman Sachs Financial Services Conference
0:33.8	here in New York where he heard from CEOs, investors, and analysts in this space
0:37.6	about what they think lies ahead for the industry. We'll talk about what he learned
0:41.7	and his outlook for the sector in 2017.
0:44.8	Welcome Richard.
0:45.8	Thank you.
0:46.8	Pause to be here.
0:47.8	So the so-called Trump trade that we've seen since the US election has benefited risk
0:51.6	assets broadly, but the financial sector in
0:54.0	particular what's made this sector so promising for investors in the wake of
0:58.8	the election? I think it's two main components that are driving at. The first, and I think probably the most important, is the dramatic change in interest rate expectations since the election.
1:11.0	So the yield curve has steepened 70 basis points since November the 7th
1:15.8	and the market is now pricing in a series of rate hikes starting this month but going
1:21.5	into 2017 and 2018.
1:24.8	Banks benefit disproportionately
1:27.5	from increases in interest rates, especially
1:29.8	from this very low level.
1:31.3	And they benefit in two ways. The first is the deposit books
1:34.1	become a lot more profitable in a rising rate environment and secondly their
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