Goldman, Citi Soar With Trump's Deregulation Promise

Shares of major US banks, including Goldman Sachs and Citigroup, surged in premarket trading on Wednesday, following Donald Trump's victory in the presidential election. Investors are betting on a wave of deregulation that could boost the banking sector's profitability and facilitate dealmaking. But what does this mean for the industry and the broader economy?

Trump's deregulation agenda, if implemented, could have significant implications for financial institutions. Key regulations he is likely to target include bank deregulation, the Basel III Endgame, the Consumer Financial Protection Bureau (CFPB), mergers and acquisitions (M&A), and environmental regulations. These changes could lower capital requirements, reduce oversight, and ease merger regulations, potentially boosting banks' lending capacity and earnings growth.

However, investors should also consider potential risks associated with deregulation. While it may boost bank stocks and facilitate dealmaking, it could also lead to reckless behavior or malfeasance. Moreover, a higher interest rate environment without a recession could theoretically lead to higher net interest income for banks and credit card companies. But there is reason for caution, too, as too little regulation can pave the way for malfeasance or reckless behavior on the part of bankers.


Trump's victory produces "a nuanced outcome" for European banks, according to analysts at Citigroup. While some European banks with significant US presence, like Barclays, rose in early trading, others, such as Banco Bilbao Vizcaya Argentaria, fell. Movement in other European bank stocks was also more mixed, as traders weighed the prospect of tariffs with other priorities the incoming Trump administration might have.


A Trump administration could also lead to higher government deficits and, therefore, higher interest rates and inflation. While this could theoretically lead to higher net interest income for banks and credit card companies, it could also pose risks to the broader economy. Investors should keep an eye on these potential risks and ensure their portfolios are well-diversified to weather any storms that may arise.

In conclusion, Trump's deregulation agenda could have significant implications for the banking sector and the broader economy. While it may boost bank stocks and facilitate dealmaking, investors should also be cautious of the risks associated with deregulation, such as reckless management behavior or runaway inflation. As always, it's essential to stay informed and maintain a balanced investment approach that considers both traditional and emerging markets while remaining vigilant for potential speculative bubbles and ensuring alignment with long-term economic fundamentals.