As the Q4 earnings season kicks off, JPMorgan Chase and Goldman Sachs are among the key players to watch. With rising interest rates and persistent inflation weighing on the broader market, the question on many investors’ minds is whether these financial giants are worth buying or if it’s time to sell. Both companies have been resilient despite market challenges, but their future performance could depend on how well they navigate the economic landscape in 2025.

JPMorgan (JPM) and Goldman Sachs (GS) Performance: Both JPMorgan and Goldman Sachs are major holdings in the Financial Select Sector SPDR ETF (XLF), with JPMorgan weighing in at around 10% and Goldman Sachs at 2.7%. Despite some struggles within the financial sector, with XLF seeing a significant drop in mid-December, these two banks have held up well.

• JPMorgan’s Strength: After JPMorgan reported strong Q3 results, with net interest income rising 3% to $23.5 billion, the stock surged on October 11. Investment banking also beat expectations, with a 31% increase in revenue, totaling $2.27 billion. As Q4 earnings are expected to show an 8% revenue growth to $41.8 billion, JPMorgan remains a strong contender in the market. The question for investors: Is the stock still a buy given its solid earnings performance, or are its gains already priced in? With its resilience during market downturns and solid earnings growth, JPMorgan could continue to outperform, making it a potential buy for investors looking for stability in the financial sector.

• Goldman Sachs Faces Slower Growth: Goldman Sachs, on the other hand, has seen its revenue growth slow, though it still delivered solid results for Q3, with a 20% increase in investment banking revenue. Equity trading surged by 18%, but its fixed income trading fell by 12%. For Q4, Goldman’s adjusted profit is expected to rise 49% to $8.16 per share, but revenue growth is expected to slow to 9%, reaching $12.3 billion. While Goldman’s stock is a reliable performer, the slowing growth rate might make some investors hesitant. For those looking for explosive growth, it might be worth considering whether to hold or sell the stock, especially as its revenue growth decelerates.

Should You Buy or Sell?

• Buy: If you’re an investor looking for a stable, reliable performer in a rising-rate environment, JPMorgan is still a strong buy. With accelerating earnings, a solid revenue base, and strong investment banking performance, JPMorgan remains poised to capitalize on rising interest rates and economic growth.
• Hold or Sell: Goldman Sachs, though still strong, may face some challenges with slowing growth. Investors looking for higher growth may want to hold off or sell, depending on their risk tolerance. The stock’s ability to continue growing as quickly as it has in the past is in question, making it less attractive compared to other high-growth financial stocks.

Focus on Rising Interest Rates and Inflation: The ongoing rise in interest rates, alongside stubborn inflation, has provided challenges for many sectors, but it also has benefitted the banking industry. The two-year Treasury yield recently traded around 4.25%, while the 10-year Treasury yield hovered near 4.66%. Higher rates provide banks like JPMorgan and Goldman Sachs with the ability to charge higher rates on loans, which can boost profits. This makes both companies attractive to some degree, though investors must weigh the impact of inflation and economic uncertainties on future performance.

For investors looking to play the financial sector in Q4, JPMorgan remains a strong buy, thanks to its solid growth trajectory and resilience during market downturns. However, for those holding Goldman Sachs, the decision to buy, hold, or sell will depend on their outlook for the company’s slower growth. As the financial landscape continues to evolve, both banks offer opportunities, but investors should remain mindful of the challenges ahead.

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