The Risk the Market Isn't Pricing Into Goldman Sachs

I was an early sceptic of Goldman's consumer push — Marcus, the credit card, the savings account. The thesis was that Goldman needed to diversify its revenue base away from the feast-or-famine volatility of trading and investment banking. Reasonable logic. Poor execution.

The retreat from consumer banking, which accelerated through 2023 and 2024, was the right operational decision. Goldman lost billions on Marcus. But the strategic consequence is that Goldman is now more concentrated in its traditional businesses — trading, investment banking, and asset management — than it was before the consumer experiment began. We have gone full circle.

That concentration is the source of my concern. In my fifteen years of coverage, the banks that have sustained premium valuations are invariably the ones with diversified, recurring revenue streams. JPMorgan has consumer banking. Morgan Stanley has wealth management. Goldman has... quarterly trading results and IPO cycles.

Three things keep me up at night about Goldman. Let me be specific.

First, the trading revenue dependency. Global markets and securities services generated roughly 45% of total revenue in 2025. That is the highest proportion in five years. Trading revenue is inherently unpredictable — it can swing 20-30% quarter to quarter based on volatility, client activity, and market conditions. When trading is hot, Goldman prints record earnings. When it is not, the earnings collapse is disproportionate to the revenue decline because the cost base — the traders, the technology, the infrastructure — is largely fixed.

Second, the IPO pipeline. Investment banking fees have recovered strongly from the 2022-2023 drought, driven by a reopened IPO window and increased M&A activity. But I have seen this movie before. The advisory pipeline is a lagging indicator of market confidence. If equity markets soften — and at current valuations, a correction is overdue — the banking pipeline dries up within two quarters. Goldman's earnings leverage to the banking cycle is the highest among its peers.

Third — and this is the one nobody talks about — the asset management pivot is working but carries its own risks. Goldman has been growing its alternatives AUM aggressively, raising capital for private equity, credit, and real estate funds. The management fees are sticky and recurring, which is exactly what Goldman needs. But the performance fees and carried interest are volatile, and the direct investing book creates mark-to-market exposure that can generate large swings in reported earnings.