Until Tuesday, Goldman Sachs stock was arguably the poster child for the Trump Bump: During the stock market rally since the President was elected, the bank had contributed more to the rise of the Dow Jones industrial average than any other company.
But that changed when Goldman Sachs (gs) reported first-quarter earnings that missed Wall Street’s expectations Tuesday. Shares fell nearly 5% by the time the market closed in a selloff that knocked roughly $4.3 billion off the market capitalization of America’s most valuable bank.
Trading at $215.49 a share, Goldman stock is the cheapest it has been since the beginning of December, nearly five months ago. In a day when the Dow shed about 114 points, or 0.6%, Goldman Sachs was responsible for 70 points of that decline.
Now the bank that was once the biggest winner of the market run-up since the election—helping carry the Dow above the 20,000 milestone—is a reminder to investors that their expectations may have gotten ahead of reality. While Goldman shares soared on investors’ hopes that Trump would slash costly financial regulations and spur economic growth that would lift interest rates, the bank’s first-quarter earnings illustrated that the President’s promises have not yet been a silver bullet for Wall Street.
Despite strong gains in U.S. stocks at the beginning of this year which boosted the markets revenues of most big banks, Goldman Sachs did not benefit from trading nearly as much as investors had expected during the quarter. Revenues from equity trading dropped 6% from the same period a year ago, which was also especially weak as a broad market selloff hurt trading desks across banks (when Goldman’s own revenue in that division sank 37%).
This time, though, Goldman blamed its disappointing results on low volatility in the market—also known as Wall Street’s “fear index”—making its customers less interested in trading their portfolios, especially foreign exchange and commodity assets.
“There were very low levels of volatility in the first quarter and subsequently lower client activity,” CFO Marty Chavez said on the bank’s earnings call. “We did underperform, and the underperformance was driven by commodities and currencies, and ultimately we didn’t navigate the market well.”
Chavez refused to elaborate further. But if Goldman Sachs struggles to make money even when markets are rising under Donald Trump, it remains to be seen how well the bank will perform if the President fails to deliver on many of the economic reforms investors are counting on.