Goldman Sachs reaches all-time high above $700 as banks expect lower capital buffers

• Goldman Sachs reached an all-time high on Monday at $714.86.
• Bloomberg is reporting that banks will be allowed to issue dividend and buyback plans starting Tuesday.
• Goldman's stress capital buffer could fall by 300 basis points.
• Fibonacci offers GS bull targets at $718 and $757.

Goldman Sachs (GS) stock led the Dow Jones Industrial Average (DJIA) on Monday, garnering a 2.3% advance and rising above $700 per share for the first time ever. GS stock reached an intraday all-time high of 714.86 before moving back to the region around $706.00 by the afternoon. Shares even traded above $720.00 in Monday's premarket.

The reason for the optimism is Friday's bank stress test results, which showed that all 22 US systemic banks that were tested passed. This means that the banks will be allowed to announce their buyback and dividend policies for the year ahead on Tuesday, according to a report from Bloomberg. Goldman's performance was notably better than the previous year.

Like Friday, the Dow Jones, which includes Goldman Sachs, is leading the party, rising 0.3% at the time of writing. The S&P 500 and NASDAQ are also gaining close to 0.2% in the mid-afternoon.

Goldman Sachs stock news

Aside from its primary task of producing interest rate decisions, the Federal Reserve (Fed) regulates banks in the US. Every year since the Dodd-Frank Act, which followed the Great Financial Crisis of 2008, the central bank runs stress tests on systemic banks in the US. The Fed games out how various events would trigger large capital bank throughout the banking system. This year, all the banks studied passed the test.

This means that by August, the central bank will determine new stress capital buffers (SCB) for each bank. These are reserve ratios that each bank is required to set aside as insurance against financial downturns.

Analysts at Jefferies estimate that 11 US banks will obtain a preliminary SCB of 2.5%, the Fed's minimum level allowed, which is nearly double the number of banks as in 2024's six.

For Goldman Sachs, Citi analysts expect that its SCB will drop from 6.2% to 3.2%, allowing a much higher level of capital payouts to shareholders.

"While we have viewed [Goldman Sachs] as best positioned to benefit from dereg[ulation], the magnitude of the SCB improvement (300bp) was much larger than expected, as it appears [Goldman] has been able to effectively argue its business model has a countercyclical component to it," Citi analyst Keith Horowitz wrote in his analysis.

With a five-year annual dividend growth rate of 19% but last year's dividend hike of 8.3%, FXStreet estimates that Goldman will announce a 40% or 10% quarterly dividend hike from $3.00 to $3.40.

Goldman Sachs stock forecast

The Fibonacci Extension chart gives bulls two levels to target on the upside: the 261.8% Fibo at $718.87 and the 361.8% Fibo at $757.16.

The downside offers us near-term support at the 161.8% Fibo at $680.58 and the historical resistance range top near $670.00.

GS daily stock chart