Goldman Sachs and Morgan Stanley Lead Multi-Month Rally Amid Strong Financial Sector Momentum

Goldman Sachs and Morgan Stanley have led a multi-month resurgence in the financial sector, with GS rising 13.7% and MS climbing 12.9% from mid-October through early January 2026. This surge marks a significant reversal from the sector’s underperformance in late 2025, driven by improved trading revenues and strengthening investment banking pipelines. Both firms reported Q4 earnings in January 2026 that exceeded analyst expectations, citing robust deal-making volumes and higher fixed-income trading activity. The rally underscores a broader shift in market sentiment toward financial institutions, which are seeing renewed demand for advisory services and capital raising. Goldman Sachs’ investment banking revenue rose 21% year-over-year in Q4, while Morgan Stanley reported a 19% increase, fueled by a record number of equity underwritings and merger advisory assignments. These figures signal growing confidence in corporate activity and market liquidity amid a stable macroeconomic backdrop. The performance of GS and MS is influencing the broader financials sector, with the KBW Nasdaq Financials Index gaining 9.4% over the same period. Equity traders are adjusting positions to favor large-cap investment banks, with institutional flows into financial ETFs such as XLF increasing by 18% in the last month. The strength in these two firms is also boosting investor confidence in the resilience of the U.S. capital markets. Market participants are closely monitoring upcoming earnings from other major banks, including JPMorgan Chase and Bank of America, which could further validate the rally’s sustainability. For now, the outperformance of GS and MS serves as a key barometer of demand in global capital markets and corporate finance.