Goldman Sachs Group, Inc. (GS), Morgan Stanley (MS), How To Win in an Environment of Rising Interest Rates

Because of mark-to-market accounting and deflationary monetary policy, it is highly likely that this strong upwards trend in the value of stocks and bond interest rates will continue. It is wise for an income oriented investor to buy stocks with high dividend yields.

Banks have played their cards right

Goldman Sachs Group, Inc. (NYSE:GS) has invested aggressively into stocks in anticipation of rising stock values and declining bond values. Goldman Sachs reported a 24% growth in revenues from its equity securities trading. The company also saw equity underwriting revenue grow by 69%. The company’s business is favorably impacted by the stock market.

So it’s highly likely that the numbers of publicly listed stocks are going to increase by a drastic amount. After all, when is a better time to buy into stock than in a bull-market?

Morgan Stanley (NYSE:MS) reported 30% growth in institutional securities trading in its latest quarter. After all, everyone makes money in a bull market. Morgan Stanley (NYSE:MS) has been buying a lot of stocks, which is why its stock continues to appreciate. Morgan Stanley grew its asset management revenues by 21% (investors are flocking into the stock market which helps to boost Morgan Stanley’s fee income from asset management).

I am a huge fan of investing into these banks. It is likely that both companies will benefit heavily from this favorable stock market environment. The decreasing value of bonds will mean even further increases in equity values. Performance based asset management fees will be going up even further, which is why an investment into both Morgan Stanley (NYSE:MS) and Goldman Sachs Group, Inc. (NYSE:GS)will mean substantial returns on investment.

Conclusion

Banks are positioning themselves intelligently. The decreasing value of bonds and increasing value of stock securities are heavily favorable to our Wall Street banks. That being the case, investors should look to divest out of fixed income and buy into stocks.

Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs.

The article How To Win in an Environment of Rising Interest Rates originally appeared on Fool.com.

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