3 Financial Powerhouses to Anchor Your Balanced Portfolio

The financial industry plays a vital role in the economy by facilitating the flow of capital and resources. Financial institutions, including investment banks, insurance companies, credit unions, brokerage firms, mortgage companies, and saving and loan associations, provide essential services that support economic growth, stability, and development.

Given the backdrop, it could be wise to invest in fundamentally sound financial stocks, JPMorgan Chase & Co. (JPM), Morgan Stanley (MS), and The Goldman Sachs Group, Inc. (GS), to lead a balanced portfolio.

Profits for the U.S. banking sector, which forms a crucial part of the financial market, surged 79.5% to $64.2 billion in the first quarter of 2024. The Federal Deposit Insurance Corporation (FDIC) attributed the substantial rise in profits primarily to the absence of special assessments that had previously impacted bank profits at the end of 2023.

Banks benefited from increased noninterest income and lower provision expenses, further contributing to their improved financial performance.

According to the Business Research Company report, the financial services market is expected to reach $44.92 trillion by 2028, expanding at a CAGR of 7.6%. The market growth can be attributed to the rising wealth of high-net-worth individuals, the growing demand for alternative investments, and the implementation of technologies like AI and cloud in financial services.

The increasing complexity of financial markets, coupled with the need for expert advice and efficient execution of financial transactions, drives solid demand for wealth management, securities brokerage, and investment banking services. The investments market is projected to grow to $5.68 trillion in 2028 at a CAGR of 7.5%.

Moreover, investors’ interest in financial stocks is evident from the Financial Select Sector SPDR ETF’s (XLF) 10.5% returns over the past six months.

Given the industry’s robust outlook, investing in quality financial stocks such as JPM, MS, and GS could be wise for future gains. Let's delve deeper into the fundamentals and growth prospects of these stocks.

JPMorgan Chase & Co. (JPM)

JPM operates as a global financial services company. The company operates through four segments: Consumer & Community Banking (CCB); Corporate & Investment Bank (CIB); Commercial Banking (CB); and Asset & Wealth Management (AWM).

On June 11, JPM’s Chase Payment Solutions expanded its Tap to Pay on iPhone for its merchant clients in Canada, first enabled by J.P. Morgan Payments in the U.S. in August 2023. The feature now allows merchants in Canada to accept in-person, contactless payments made using an iPhone more seamlessly.

Sephora is the company’s first client in Canada to enable Tap to Pay on iPhone, which is currently rolling out across more than 130 freestanding stores nationwide. This development will expand the company’s capabilities and contribute to its vision of building a modern payments business.

JPM’s net revenue for the first quarter that ended March 31, 2024, increased 9.3% year-over-year to $41.93 billion. The company’s net income and EPS came in at $13.42 billion and $4.44, indicating growth of 6.3% and 8.3% from the prior year’s quarter, respectively.

Furthermore, the company’s total assets stood at $4.09 trillion as of March 31, 2024, compared to $3.74 trillion as of March 31, 2023.

Analysts expect JPM’s revenue for the fourth quarter (ending December 2024) to increase 3.5% year-over-year to $39.94 billion, and its EPS for the same quarter is expected to grow 19.8% year-over-year to $3.64. Moreover, the company has surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.

Shares of JPM have surged 17.3% over the past six months and 36.8% over the past year to close the last trading session at $194.98.

JPM’s POWR Ratings reflect its robust outlook. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

JPM has a B grade for Stability, Sentiment, and Momentum. It is ranked #4 out of 9 stocks in the Money Center Banks industry.

In addition to the POWR Ratings we’ve stated above, we also have other ratings of JPM for Quality, Growth, and Value. Get all JPM ratings here.

Morgan Stanley (MS)

MS is a financial holding company that provides various financial products and services to corporations, governments, financial institutions, and individuals worldwide. It operates through Institutional Securities; Wealth Management; and Investment Management segments.

On June 6, MS’ Morgan Stanley Investment Management, through investment funds managed by Morgan Stanley Infrastructure Partners, a private infrastructure investment platform within MSIM, agreed to acquire a 49% stake in Onslow Iron Road Trust in partnership with Mineral Resources Limited, which will continue to own a 51% stake.

The new stake will likely deliver an attractive, inflation-protected cash yield backed by significant barriers to entry and attractive underlying economics.

During the first quarter that ended March 31, 2024, MS’ net revenues rose 4.3% year-over-year to $15.14 billion. Its pre-tax income increased 16.9% year-over-year to $4.39 billion. Also, net income applicable to MS and EPS came in at $3.41 billion and $2.02, indicating growth of 125% and 137.6% from the year-ago value, respectively.

Street expects MS’ revenue and EPS for the second quarter (ending June 2024) to increase 6.4% and 14.7% year-over-year to $14.32 billion and $1.65, respectively. Furthermore, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.

Over the past six months, MS’ stock has gained 6.9% and 11.9% over the past year to close the last trading session at $97.04.

MS’ sound fundamentals are reflected in its POWR Ratings. The stock has a B grade for Momentum and Stability.

Within the Investment Brokerage industry, MS is ranked #10 of 20 stocks. Click here to access additional ratings of MS for Growth, Sentiment, Quality, and Value.

The Goldman Sachs Group, Inc. (GS)

GS is a financial institution that offers a range of financial services for corporations, financial institutions, governments, and individuals worldwide. It operates in Global Banking & Markets; Asset & Wealth Management; and Platform Solutions segments.

On April 12, GS declared dividends on the following series of its non-cumulative preferred stock (each representing 1/1000th interest of preferred stock): $385.79 per share of Floating Rate NCPS, Series A, $385.79 per share of Floating Rate NCPS, Series C, $380.90 per share of Floating Rate NCPS, Series D, $398.44 per share of 6.375% Fixed-to-Floating Rate NCPS, Series K.

The company further declared $662.50 per share of 5.30% Fixed-to-Floating Rate NCPS, Series O, $515.59 per share of 5.00% Fixed-to-Floating Rate NCPS, Series P, $475.00 per share of 3.80% Fixed-Rate Reset NCPS, Series T and $515.63 per share of 4.125% Fixed-Rate Reset NCPS, Series V (each depositary share represents 1/25th interest in a share).

GS pays an annual dividend of $11, which translates to a yield of 2.44% at the current share price. Its four-year average dividend yield is 2.32%. Moreover, the company’s dividend payouts have increased at a CAGR of 30.1% over the past three years. GS has raised its dividends for 12 consecutive years.

For the first quarter that ended March 31, 2024, GS’ total net revenues increased 16.3% year-over-year to $14.21 billion, of which its revenue from the Global Banking & Markets segment rose 15.2% from the year-ago value to $9.73 billion.

In addition, the company’s net earnings applicable to common shareholders came in at $3.93 billion and $11.58 per share, up 27.3% and 31.7% year-over-year, respectively. Its total assets were $1.70 trillion as of March 31, 2024, versus $1.64 trillion as of December 31, 2023.

Analysts expect GS’ EPS for the second quarter (ending June 2024) to increase 187.1% year-over-year to $8.84, and its revenue for the ongoing quarter is expected to grow 16% year-over-year to $12.64 billion. Moreover, the company topped the consensus revenue estimates in each of the trailing four quarters.

GS’ stock has surged 19.6% over the past six months and 36.1% over the past year to close the last trading session at $450.18.

GS’ POWR Ratings reflect its bright prospects. GS has a B grade for Momentum. The stock is ranked #11 among 20 stocks in the Investment Brokerage industry.

To access GS’ other ratings for Sentiment, Quality, Value, Stability, and Growth, click here.

What To Do Next?

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JPM shares fell $0.38 (-0.19%) in premarket trading Tuesday. Year-to-date, JPM has gained 16.01%, versus a 15.46% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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