Investment banks are struggling in a high-interest-rate world

But the change does not fully explain Goldman Sachs’s struggles

NEW YORK, NEW YORK - DECEMBER 16: People walk by Goldman Sachs headquarters in Manhattan on December 16, 2022 in New York City. Goldman Sachs, the global investment bank, has announced that it plans on cutting up to 8% of its employees early next year as world economies and markets continue to struggle with inflation, the war in Ukraine and China's Covid policies among other issues. (Photo by Spencer Platt/Getty Images) — Image: Getty Images

Jan 17th 2023|Washington, DC

Shareholders like profits: a steady stream of income they can count on, quarter after quarter. The earnings America’s biggest banks make, however, are often pushed around by the volatility of the economy they serve. If the economy accelerates, demand for loans takes off; if it slows, bankers must set aside provisions for bad loans. Investment banks’ trading businesses tend to do well in times of volatility and uncertainty, but their advisory services sell best when markets are healthy and stable. Bank bosses must try to balance their exposure to these forces.

This article appeared in the Finance & economics section of the print edition under the headline “Marginal profits”