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Goldman Sachs' results were fine, but they could've been better | Rolls-Royce is slicing a chunk of staff, and investors are on board |
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Hi Reader, here's what you need to know for October 18th in 3:14 minutes.

🍷 The swirl-and-spit method might work for a half-decent wine, but you'll need more than that when you're investing in the stuff. Come along to Acquiring A Taste For Rare Wine Investments on October 30th, and discover how to tell the difference between a corker of an alternative investment and the makings of a bad hangover. Grab your free ticket

Today's big stories

  1. Goldman Sachs reported better-than-expected third-quarter results, but JPMorgan was the real star
  2. Retail investors are pretty optimistic this quarter, so here’s what you’re planning to do about it – Read Now
  3. UK stock market darling Rolls-Royce announced that it'll cut up to 2,500 jobs, and investors approved

Not-Quite-Goldman

Not-Quite-Goldman

What’s going on here?

Goldman Sachs reported better-than-expected results on Tuesday, but the big bank’s still far off the top spot.

What does this mean?

Goldman makes most of its money by taking commissions on its clients’ trades and charging hefty fees from investment banking deals. But that only works if clients are trading and deals are being made, and right now, there isn’t much to keep the big bank busy. That’s partly why Goldman’s stock price has underperformed JPMorgan and Morgan Stanley this year. Although in fairness, while Goldman’s third-quarter profit still landed a third lower than the same time last year, revenue in the big bank’s stock trading department was up 8%. That’s a small sign of energy after two years of lackluster stock performance – and the CEO thinks that’s just the start, expecting a “continued recovery if conditions remain conducive”. That’s a big “if”, mind you.

Why should I care?

Zooming out: Time to count on your laurels.

Goldman’s forecast to wrangle around $46 billion in revenue this year, which will have barely budged from the bank’s best pre-financial crisis results a whole 16 years ago. That’s not a result of laziness, though: the institution’s been hunting for money-making opportunities for a while, but it’s slim pickings out there. So for now, investors will be watching to see if Goldman’s expertise in trading and investment banking will be enough to pay dividends, metaphorically and literally speaking.

The bigger picture: Jack of all trades, master of some.

JPMorgan, on the other hand, is spinning plates, and the extra coordination is really coming in handy. The big bank’s cacophony of money-making routes means that if, say, corporate dealmaking drops off, another department – think trading, consumer lending, or wealth management – can pick up the slack. No wonder, then, that JPMorgan’s earnings have almost tripled over the last 16 years while Goldman’s have stood still.

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Analyst Take

Not “Dumb Money” After All: What Retail Investors Are Doing Now

Not “Dumb Money” After All: What Retail Investors Are Doing Now
Photo of Carl Hazeley

Carl Hazeley, Analyst

We recently caught up with over 4,000 modern retail investors to find out how you’re feeling about markets and what your portfolio plans are now.

You shared that two-thirds of you are optimistic about global stock markets, despite higher interest rates and geopolitical uncertainty.

Plus, half of you have between $10,000 and $100,000 that you’re looking to invest right now.

And you told us about the opportunities that are grabbing your attention across stocks, exchange-traded funds, money markets, and more.

So that’s today’s Insight: how your optimism’s feeding into your investing plans, which assets retail investors are betting on, and the major one everyone’s avoiding.

Read or listen to the Insight here

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Business Class

Business Class

What’s going on here?

British jet engine maker Rolls-Royce announced that it will cut up to 2,500 jobs, an effort to make the journey to profit a little smoother.

What does this mean?

Rolls-Royce got a new CEO back in January, one that swiftly labeled the company a “burning platform” and revamped the top management roles before the fresh nameplate had even hit the desk. And now, 2,000 to 2,500 jobs – around 6% of the firm’s workers – are on the chopping block, a bid to cut costs and turn hard-earned revenue into profit. That type of management won’t win you any friends, but it might pay off elsewhere: Rolls-Royce’s stock has revved up 200% over the past year, claiming the title of the FTSE’s best performer. Plus, after news of the job cuts made the rounds, investors sent the stock up another 2%.

Why should I care?

For markets: Rolls-Royce is flying.

Rolls-Royce has also been gassed up by some factors outside of its control. Countries are bumping up their defense budgets in the face of bubbling geopolitical tensions and long-haul flights are getting booked up fast, both of which have drummed up demand for Rolls-Royce airplane engines and maintenance. That said, strict decision-making has clearly paid off for the firm. After all, shares in businesses with their act together – robust cost management, operational efficiency, and long-term strategies – tend to fetch a premium when the wider environment is uncertain.

The bigger picture: Cross your fingers.

Job cuts are a blow for individuals, but in this case, they also suggest that the burning hot job market – a contributor to inflation – could be cooling down. And this trend is spreading across the UK: wages are still rising in the country, but at a slower pace. The differences are small, but any momentum in the right direction could give the Bank of England enough reassurance to avoid hiking interest rates any higher when it meets next month.

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