Goldman Set for Gains, but Mind That ‘Cliff’

With Citigroup's high-profile executive shuffle occupying the minds of most investors on Tuesday, Goldman Sachs' strong earnings all but fell by the wayside.

Goldman's impressive topline results were not enough to help the stock, which dipped more than 1 percent — even as Citigroup's shares rallied on the appointment of a new CEO.

Despite Tuesday's market action, Douglas Sipkin, senior analyst at Susquehanna Financial, thinks Goldman's results have "positive implications" for the rest of the year.

"September and October have clearly been a big improvement in the debt capital markets, which Goldman is obviously very leveraged to, " Sipkin said.

Although the analyst didn't give an estimate for where he expected Goldman's stock to trade, he did state he expected it to "consolidate a little bit of a big move." The stock jumped to a new 52-week high above $128 earlier this year, but has since retraced the move, orbiting above $122.50 in late U.S. trading.

"The overall bias toward the whole [financial sector] is actually improving quite a bit, " Sipkin said, noting the beneficial impact of more Federal Reserve bond buying. "So I expect the stock to be higher over the next week or two."

However, the "fiscal cliff" fears that have dogged markets for much of the last several weeks could dampen Goldman's good fortunes, Sipkin said. The raft of tax hikes and spending increases that could come early next year could undermine the bank and its peers in the financial sector, he added.

"If the fiscal cliff does not go the way the market hopes or if it's not resolved, that could certainly be an impediment into that momentum that we're starting to see in the market, " Sipkin said. "So clearly there's some uncertainty about that, and that needs to get resolved the right way. But if it does, I do think that the capital markets and [financial stocks] in general will continue to perform really well."

—By's Javier E. David

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