A trifecta of uncertainty — from the Iran war to AI disruption to private credit — is crushing financial stocks this year. While shares of Goldman Sachs and Wells Fargo have been caught up in the downdraft, their businesses should be largely insulated from these headwinds. Nevertheless, Club stocks Goldman Sachs and Wells Fargo have been painted with the same brush as the financial sector at large. In a major reversal from last year’s strength, Goldman has dropped 11% in 2026, while Wells has declined more than 20% year to date. We do not think these stock declines reflect the business fundamentals. It’s a tough — but temporary — pill to swallow, and why we believe these titans of Wall Street should come out just fine on the other side of the current challenges. War with Iran The Iran war has led to volatility in bank stocks due to concerns that soaring oil prices could hurt both consumer and business clients and lead to reduced profits. Spiking oil means higher gas and diesel prices paid at the pump and higher fuel prices required to fly airplanes — all of which can create an inflation shock. Against that backdrop, it might be tough for the Federal Reserve — even under the next likely Fed chief Kevin Warsh — to cut interest rates. That could be bad news for consumers looking for borrowing costs to go down, not to mention being squeezed by paying more to drive and fly places. When consumers are feeling pressured, they tend to rein in spending, which can lead to taking out fewer loans or defaulting on the ones they have. On the business side, those higher fuel costs can pressure margins as energy is a major, unavoidable cost for companies, too. Additionally, when business confidence takes a hit, executives may be more hesitant to make acquisitions and do initial public offerings. That means they don’t need investment banking services as much. They may also look to borrow less. “All of that essentially means growth outlook [for banks] could be slower. We could see more defaults if we get into some version of a stagflationary environment,” Bank of America research analyst Ebrahim Poonawala told CNBC in a recent interview. Stagflation is when there’s muted economic growth, high inflation, and high unemployment. Poonawala, who covers Goldman Sachs, added, “It does increase the probability of downside risks relative to what it would be assumed a week or a month ago.” As a more traditional money center bank, Wells Fargo is more exposed to the lending risks and less to a pullback in dealmaking, while Goldman Sachs is more exposed to fewer mergers and acquisitions. Goldman Sachs’ global banking and markets division, which includes its dealmaking fees, accounted for roughly 77% of overall revenue last quarter . Revenue from investment banking, its largest segment, jumped 25% year over year in the fourth quarter. Weakness in deals is less of a concern for Wells Fargo’s growing investment banking business. IB is housed in the firm’s…
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