Goldman Sachs defended its strategy of waiting out the downturn in fixed-income markets, issuing a preemptive strike ahead of first-quarter earnings against those who argue that revenue from the business doesn’t justify the investment.
“It is important to remember that cycles do turn, even if the timing of such inflections may be difficult to predict,” Chief Executive Officer Lloyd Blankfein and President Gary Cohn said Friday in their annual letter to shareholders. “It certainly feels like the cycle has been prolonged, particularly as interest rates in many parts of the world remain at - or even below - zero, and growth and deflation concerns, among other worries, have persisted.”
Bloomberg News reports that Blankfein, Cohn and Chief Financial Officer Harvey Schwartz have resisted calls to pull back on fixed-income trading, urging patience even as competitors including Morgan Stanley scale back. The calls may get louder this month, with some estimates saying fixed-income trading revenue could be down 59%. The firm reports results on April 19.
In the meantime, Bloomberg also reports that the “robust” performance of the mergers-and-acquisitions market in 2015 will probably continue, Goldman Sachs said.
“Volumes as a percentage of market capitalization are still below prior-cycle peak levels,” Chief Executive Officer Lloyd Blankfein and President Gary Cohn said Friday in their annual letter to shareholders. “We see this as a sign that there is still some room to run for M&A activity, particularly when equity markets show signs of sustained stabilization.”