Oppenheimer downgraded Goldman Sachs (GS) to Underperform from Perform on Tuesday. Analyst Chris Kotowski cited concerns that the banking sector is entering a late-stage expansionary cycle. Kotowski noted that investment banks currently trade at valuations significantly above their historical averages.
The firm also downgraded Morgan Stanley to Underperform. Bank of America and Citigroup were lowered to Perform from Outperform. Oppenheimer stated that current valuations for major banks are no longer compelling despite a strong outlook for trading and investment banking.
Oppenheimer recommended shifting capital into alternative asset managers including Blackstone, KKR, and Ares Management. The firm also suggested focusing on commercial banks like U.S. Bancorp and PNC. These institutions are believed to be in an earlier expansion phase.