Should You Buy Goldman Stock as Macro Clarity Rekindles Dealmaking?

Core Insights - U.S. dealmaking activity was subdued in early 2025 due to macroeconomic uncertainty and tariff concerns, but momentum has improved in the second half of 2025 and is expected to continue into 2026, benefiting firms like Goldman Sachs [1][9] Industry Overview - Private equity sentiment has significantly rebounded, with confidence in pursuing mergers and acquisitions (M&A) rising from 48% in Q1 2025 to 86% by year-end, and 90% of respondents expect deal activity to either increase or remain steady [2] - Dealmaking is shifting towards execution-driven strategies such as carve-outs and buy-and-build transactions, favoring mid-market activity and smaller, synergy-rich add-ons [3] Company Performance - Goldman Sachs led global M&A rankings in 2025 with $1.66 trillion in deal volume, achieving a market share of 36.4% and a 31% increase in M&A advisory fees to $3.37 billion in the first nine months of 2025 [4][5][9] - The Global Banking and Markets segment's net revenues rose 17% year over year, while the Asset and Wealth Management division's net revenues increased by 4% [8] Strategic Initiatives - Goldman Sachs is streamlining operations by exiting underperforming consumer banking ventures and focusing on higher-margin businesses [6][8] - The firm is expanding its private equity and alternatives business through acquisitions, including the planned acquisition of Industry Ventures, to strengthen its position in private markets [10][11] Technological Advancements - Goldman is implementing a firmwide AI transformation aimed at enhancing productivity and expanding operating leverage, with initiatives like "One Goldman Sachs 3.0" and the "GS AI Assistant" [14][15] - The AI strategy is expected to shift revenue towards higher-fee, data-driven businesses and improve valuation and risk assessment in private markets [17] Financial Strength - Goldman maintains a strong balance sheet with cash and cash equivalents of $169 billion as of September 30, 2025, allowing for aggressive capital returns through buybacks and dividends [19] - The company increased its quarterly dividend by 33.3% to $4 per common share and has a share repurchase program of up to $40 billion [20] Earnings Outlook - Analysts have revised earnings estimates upward for Goldman Sachs, projecting year-over-year growth of 20.8% for 2025 and 12.8% for 2026 [21] - Despite a higher forward price/earnings ratio of 17.26X compared to the industry average of 15.71X, the valuation is supported by superior growth prospects [23][30] Stock Performance - Goldman shares have increased by 68.1% over the past year, outperforming industry peers [26] - The combination of ongoing growth initiatives, capital returns, and a robust M&A backdrop positions Goldman Sachs favorably for long-term financial performance [28][29]