Oppenheimer Downgrades Goldman Sachs and Morgan Stanley to Underperform, Recommends Shift to Alternative Asset Managers
Alina Collins
Oppenheimer cut Goldman Sachs and Morgan Stanley to underperform and redirected investors toward alternative asset managers — a signal that Wall Street's big-bank valuation window is closing as the cycle enters its late stage.
Who got downgraded, and by how much?
Analyst Chris Kotowski cut Goldman Sachs and Morgan Stanley from perform to underperform — a two-notch drop in one move.
Bank of America and Citigroup were lowered from outperform to perform — not the bottom rung, but the buy case has been pulled.
This means → Oppenheimer turned bearish on four of Wall Street's largest banks at the same time, an unusually broad downgrade.
Why now? Where do valuations stand?
The core number: investment-bank P/E relative valuation has hit 107% of its historical average, far above the long-run mean of 70%. In plain terms = these stocks are roughly 50% more expensive than their normal level.
Commercial-bank relative valuation sits at 78% of its historical average — not extreme, but no longer the "persistently cheap" setup that held for over a decade after 2008.
Kotowski wrote that the industry "has not ceased being relatively mature and cyclical — it has simply entered a later stage of the cycle." This reflects his view that today's high earnings and trading volumes are not sustainable.
Where should the money go instead?
Within traditional banks, Oppenheimer named U.S. Bancorp (USB) and PNC Financial, arguing the commercial-banking expansion cycle is still in a relatively early stage.
This means → even inside the bank sector, pure commercial lenders and investment banks sit at very different points in the cycle — they should not be treated as one trade.
The other path: shift into alternative asset managers (firms that manage private equity, credit, and other non-public-market assets) — specifically Ares Management, Blackstone, and KKR.
How did the market react?
All four downgraded names fell pre-market: Morgan Stanley down 0.8% was the deepest, Goldman off 0.5%, BofA off 0.4%, Citi off 0.1%.
The recommended names were mixed: U.S. Bancorp rose 0.9% to lead, KKR and Ares each up 0.4%, PNC up 0.1%, Blackstone slipped 0.1%.
In plain terms = the market largely agreed — downgraded stocks dipped, favored names edged up — but the moves were small, suggesting this report is more of a medium-term directional signal than an immediate catalyst.
Content is for reference only, not financial advice.