What I'm Watching With Goldman Sachs to See if It Beats the Market

Financial services giant Goldman Sachs (NYSE: GS) has been outperforming its major rivals in recent years. Last year, the stock returned about 53%, and over the past three years, it has an average annualized return of about 39%.

That beats all of the other major financial services giants, including JPMorgan Chase (NYSE: JPM), Morgan Stanley (NYSE: MS), Citigroup (NYSE: C), and Bank of America (NYSE: BAC).

Even this year, a volatile one for financial stocks, it is only down about 1.8%, which is the best in its class other than Citigroup.

What really sets Goldman Sachs apart is its strength in mergers and acquisitions (M&A) and investment banking. There are a few different metrics to measure the largest investment banks -- number of deals, fees, revenue, value of deals, size of deals -- and Goldman Sachs ranks at or near the top of the list in all of them.

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While its chief investment banking rivals, JPMorgan Chase and Morgan Stanley, are also strong, perhaps equally so in some metrics, there is a key difference that has enabled Goldman Sachs to outperform over the course of the past three years.

Keep an eye on investment banking

Goldman Sachs gets a much higher percentage of its overall revenue from investment banking than the other two major rivals. In the fourth quarter, Goldman Sachs generated $2.58 billion in investment banking revenue, which is about 19% of the company's total revenue.

Morgan Stanley made $2.41 billion in investment banking revenue in Q4, which is about 13% of total revenue. JPMorgan Chase made $2.55 billion from this line item, but that's just 5.5% of its total revenue.

So, that has really been the primary reason for Goldman Sachs' outperformance. When investment banking and M&A is hot, Goldman Sachs typically outperforms. The last two years have been strong years for M&A, particularly 2025, which was the best year for M&A since 2021, with the value of deals rising 43% over 2024.

2024 was nowhere near as good, but it marked a recovery year, improving from bad years in 2022 and 2023, when interest rates soared. In those years, Goldman Sachs underperformed some of its rivals.

Record Q1 for investment banking

So far in 2026, the investment banking momentum continues, as M&A deals are off to a record start in Q1. The strength comes from several factors, including lower interest rates, pent-up demand, and artificial intelligence (AI) as companies look to acquire AI capabilities.

This bodes well for Goldman Sachs for the reasons explained above. Goldman Sachs is one of the first companies to report Q1 earnings when it posts its results on April 13. I'll be watching for its investment banking results, not only because it is the major revenue driver for Goldman Sachs, but also because it will serve as a bellwether for the industry.

With Goldman Sachs trading at a fairly reasonable 15 times earnings, the strong results that are expected for investment banking in Q1 could give Goldman Sachs stock a nice jolt and help it beat the market in 2026.