“Your margin is my opportunity” — that’s the famous quote attributed to Amazon founder Jeff Bezos. It speaks directly to a strategy to go after high-margin businesses that are ripe for disruption. With banking doyen Jamie Dimon referencing that quote in the latest JPMorgan transcript, you’re seeing a Venn diagram of the best of the best in the business world.
While JPMorgan gives my portfolio an underpin of consumer banking in the US alongside the more exotic stuff, Goldman Sachs is a shot in the arm of pure investment banking and wealth management goodness. There are other very good names in US banking of course, but this combination works for me.
JPMorgan’s share price has had a tough start to 2026, which isn’t a surprise given the geopolitical backdrop. Still, it’s up 35% in the past 12 months, so I remain a happy shareholder in this financial services giant. Goldman Sachs, my other US banking position, is up a spectacular 82% in the past year!
Wall Street’s finest minds continue to deliver. In the spirit of Bezos, they are out there looking for value-creating opportunities across existing and new products.
For example, Goldman Sachs is the No 1 rated M&A adviser globally. This means it can charge breathtaking fees on the world’s most important transactions. It is also focusing on growth areas such as private credit, a hive of activity despite recent concerns about the risk in this space.
JPMorgan’s investment banking efforts are truly world-class, but its innovation efforts are broader as it has an extremely strong consumer and corporate banking business. In areas such as payments and even stablecoins, it is actively seeking ways to drive better risk-weighted returns.
The risk weightings are a contentious point at the moment, with JPMorgan particularly irritated by the regulatory approach being taken. The current proposals around capital rules would increase its CET1 capital by about 4%. In simple terms, this means JPMorgan would have to run an even more conservative balance sheet than it already does, with additional equity capital held against assets.
If there’s more equity, then return on equity (ROE) becomes harder to maintain at juicy levels. ROE is one of the most important drivers of a bank’s valuation, so it’s not a surprise that JPMorgan is very sensitive to these proposed changes.
Goldman Sachs seems less concerned about the regulatory environment. It operates a different model to JPMorgan, and these product-specific rules become very complicated, so it’s entirely plausible that its business isn’t as severely affected by the proposed changes.
Risk is part of the game for these banks. There’s a great section in the JPMorgan transcript where Dimon compares its trading business to that of Home Depot. JPMorgan buys and sells almost $4-trillion a day across commodities, fixed income and credit products and equities. Sometimes, it might be on the wrong side of a trade, but he sees that as being similar to inventory on the shelf at Home Depot that didn’t quite do as well as expected.
Love it or hate it, Wall Street is the centre of the financial universe as we know it
Generally, the Wall Street names do well in volatile markets where investors and corporates are changing their approach to risk. Whether the market is shifting in a risk-on or risk-off direction, there are capital flows that create opportunities. There are deals to be done. There are derivatives to be structured and advisory fees to be earned. It’s like a Home Depot full of shoppers — you get the idea.
Investing in these banks is a way to express a bullish view on their ability to participate in the financialisation of global economies. The combination of an interconnected global financial system with heightened geopolitical volatility across the world, and the depth of US capital markets, means Wall Street is practically a money-printing machine.
And to smooth out those delicious returns, both Goldman Sachs and JPMorgan have pushed hard into asset and wealth management. Between them, they have assets under supervision and management of $8.5-trillion. This creates a powerful annuity underpin in the earnings base, encouraging investors to pay more for the earnings.
Love it or hate it, Wall Street is the centre of the financial universe as we know it. My theory is simple: if I’m going to invest in the most lucrative banking profit pool in developed markets, I may as well pick the best of the best in their respective fields.
So far, so good. Not every quarter will be brilliant, and there will always be a few underlying headaches, but the biggest brains in US banking have served my portfolio well. The margins they identify become my opportunity as a shareholder!
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