In a year that has seen shares of many banks hit new highs, one name has noticeably lagged the rest of the sector: Goldman Sachs. But, according to one top technician, now might be the time to bet on one of Wall Street's oldest banks.
In a year that has seen shares of many banks reach new highs, one name has noticeably lagged the rest of the sector: Goldman Sachs .
But, according to one top technician, now might be the time to bet on one of Wall Street's oldest banks.
Goldman announced Monday that President and Co-chief operating officer Harvey Schwartz will step down in April making way for the way for the company's other president, David Solomon, to likely assume CEO Lloyd Blankfein 's role when he eventually retires. Under Blankfein's watch, the stock has returned to levels before the 2008 crash, but has sharply trailed rivals Morgan Stanley and J.P. Morgan Chase over the past year.
Wald sees that underperformance as an opportunity for investors.
"The stock is just getting above its 2007 high and you can really make a case on a relative basis is just starting to get going," said Wald, who added that the stock could ultimately hit $300.
Wald's bullish views on Goldman dovetail with a generally positive backdrop for financials overall.
"A strong economy should help their loan portfolios, higher interest rates should help the spread they earn on those loan portfolios, the recent volatility in the markets should help their trading and capital markets operations, and finally a strong market should be a tail wind for their asset management groups," Michael Binger, senior portfolio manager at Gradient Investments, said on "Trading Nation."
Analysts have grown more bullish on the sector as the likelihood of three Federal Reserve hikes this year became ingrained in the market psyche. Investors view higher rates as a positive sign for banks as it increases the profit margins on loans.
The Federal Open Market Committee has said it intends to move further off of historically low interest rate levels as inflation heats up and the U.S. economy continues to strengthen. Markets have priced in the first Fed rate increase of the year at the meeting next week, and another in June and then in September, according to CME Group fed funds futures.
Binger sees some of the large money center banks and asset managers as the key beneficiaries of a rising rate environment. Specifically, he likes J.P. Morgan and BlackRock as the two financials stocks set to benefit from the sector's growing tail winds.
"They both have strong dividends and we expect those dividends to grow in the future," Binger said.
Goldman Sachs is up 6 percent year to date, J.P. Morgan 9 percent and BlackRock 10 percent. The financial sector ETF XLF has climbed 5 percent so far in 2018.
Disclosure: Gradient Investments has positions in J.P. Morgan and BlackRock. It could not be immediately ascertained if Michael Binger or Gradient have a position in Goldman Sachs.