Goldman Sachs' earnings was down a whopping 69 percent for their most recent quarter. It looks like they are taking it on the chin.
Lots of Goldman's business is in the investment banking space. This means many business-to-business deals aren't getting done now. Thus, Goldman is going through significant layoffs.
We've seen P/E compression all last year. This is being followed up by revenue and earnings reductions. Last quarter's earnings (2022 Q3) showed many firms beginning to feel the slow down. This coming quarter's earnings (2022 Q4) will show the trend accelerating.
The layoffs in tech began early last year with a warning by Sequoia Capital to their VC clients to start "towing the line". We are now seeing increasing tech layoffs, as well as, layoffs in other industries.
While inflation may be alleviating somewhat given recent reports, historically inflation doesn’t quickly come and go away. Inflation usually has a “long tail” and it is “sticky”.
The Goldman earnings report is another key metric pointing to the economic downturn.
The signs are becoming clearer that we’re facing some rough economic waters ahead.
While these are the times to position for the eventual market upturn, it is critical to understand the value of companies you want to own. This means understanding their economics, financial metrics, and market position. It is not the time to “take a winger” on a gut feeling about a company without any corroborating factual support.
Stay safe!
Be smart, be well-read, be aware and be successful.
