Each quarter, when publicly traded companies release their results, they tend to enthusiastically emphasize what’s going well and smooth over any missteps.
That will be considerably harder to do this quarter, if Goldman Sachs’ results are any indication. Goldman kicked off Wall Street’s first-quarter earnings season with blunt warnings about the impact of the war in Iran. The bank said that, compared with a few months ago, it detected less enthusiasm from corporate clients for the kinds of big deals — initial public offerings, mergers and the like — that are the bedrock of investment banking.
This meant that although the bank posted a profit of $5.6 billion in the first quarter, up about 20% from the same period a year earlier, its shares fell 3%.
David M. Solomon, CEO of Goldman, told analysts on Monday that there was “no doubt” that violence in the Middle East was having an effect.
“Certainly, CEOs are closely watching how what’s happening — especially commodity prices — is being reflected in the economy and consumer demand. If the resolution of the conflict drags on, that will likely be a negative factor,” he said.
To some extent, geopolitical uncertainty is not necessarily bad for business.
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Goldman’s trading desks earned billions in additional fees from heightened volatility in oil and other markets, while hedge funds and other professional investors paid the bank more to borrow money and make complex, expensive bets on the turn of events.
Even so, trading results in currencies and commodities, among other areas, were below expectations.
Investors have remained relatively optimistic despite daily swings in headlines out of the Middle East.
Most large publicly traded companies continue to post stable profits; Year-over-year earnings growth for S&P 500 companies is expected to be around 13% in the three months ending in March, which would mark the sixth consecutive quarter of double-digit growth for the index.
Many other large companies are due to release results this week and will be questioned by investors about the effects of the war, including JPMorgan Chase, PepsiCo and Netflix.
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