Goldman Sachs(US:GS)2026-01-06 02:23Capital Markets 2026 Outlook Summary Industry Overview - The report focuses on the Capital Markets industry, specifically analyzing the performance and outlook for various segments including Alternative Asset Managers, Traditional Asset Managers, Brokers, Trust Banks, and Exchanges [2][8]. Key Themes and Insights Theme 1: Capital Markets Recovery - A significant recovery in Capital Markets is anticipated, particularly in M&A and Equity Capital Markets, with global announced M&A volumes increasing over 40% year-on-year in 2025 [28]. - IPO activity has also seen a meaningful re-acceleration, although both M&A and IPO volumes remain below cyclical averages, indicating potential for further growth [28][39]. - Companies such as CG, BX, TPG, and KKR are highlighted for their substantial earnings exposure to Capital Markets-sensitive revenues, estimated at 30%-40% of total revenues [29]. Theme 2: Interest Rates and Asset Growth - The Federal Reserve's funds rate is projected to decline to 3% by the end of 2026, with a steepening yield curve expected [6]. - Wealth Brokers and Trust Banks are anticipated to experience cash revenue and net interest income (NII) growth in 2026, driven by increased balances and lower asset sensitivity compared to previous cycles [6][15]. - Specific firms like RJF and SCHW are expected to outperform consensus estimates, with RJF projected to grow by 2% in 2026 and 7% in 2027 [6]. Theme 3: Alternative Managers' Growth - Alternative Asset Managers are expected to see management fee growth accelerate to a 16% compound annual growth rate (CAGR) in 2026-2027, up from 11% in 2023-2025 [6][11]. - Growth is anticipated to broaden beyond Credit, with Private Equity and Real Estate showing signs of recovery, alongside continued strength in Infrastructure and AI sectors [6]. Theme 4: Traditional Managers' Outlook - Traditional Asset Managers are expected to see long-term organic growth accelerate to over 1% in 2026, with firms like AMG and BLK leading in organic base fee growth [7]. - Growth drivers include increased flows into Fixed Income, Active ETFs, and leveraging distribution capabilities for Private Markets strategies [7]. Theme 5: Exchange Volume Challenges - Exchanges are facing tough year-on-year volume comparisons, particularly in 2026, following record volumes in 2025 [7]. - However, sectors such as Energy and Equities are expected to deliver meaningful volume growth, supported by retail investor participation and recovery in IPO markets [7][14]. Additional Insights - The report indicates a positive outlook for Trust Banks, with firms like BK and STT expected to benefit from accelerating deposit growth and favorable NII outlooks [15]. - The report emphasizes the importance of expense management and capital returns in driving EPS growth across various segments [15][12]. - Despite a challenging environment, select areas within the Capital Markets are expected to see structural growth, particularly in newer product areas like event contracts and prediction markets [16]. Conclusion - The Capital Markets industry is poised for a recovery driven by improving financial conditions, increased M&A and IPO activity, and growth in alternative and traditional asset management sectors. The outlook remains broadly constructive, with specific firms identified as key beneficiaries of these trends [2][8].