Further comforting signs of stabilisation in financial services

Goldman Sachs' announcement of strong quarterly profits and its intention to repay $10 billion in government rescue funds ($5 billion raised already) can be interpreted as the latest in a series of signs that the US financial industry is stabilising.

John Benson, of Marsico Capital Management, subadviser to Gartmore, warned of a growing divide between a small number of banks like Goldman possibly strong enough to return their federal rescue money and others too weak to go without government funds. "This reinforces our analysis of the strong getting stronger, with the survivors of the fallout from the financial crisis becoming acquirers of market share," he commented. Gartmore's US Opportunities Fund, SICAV US Opportunities and the US Growth Fund all have exposure to Goldman Sachs, whose motive for returning the billions of taxpayer dollars is an effort to extricate itself from heightened government control.

In March, investors enthusiastically received the latest initiative on dealing with troubled assets from US Treasury Secretary Timothy Geithner. "We particularly welcomed the detail and improved exposition of the plan, compared with an earlier iteration in February that earned market brickbats for its lack of detail," noted John. The three programmes (unveiled by Geithner) could buy up to US$2 trillion in real-estate assets that have been weighing down banks, paralysing credit markets and delaying the economic recovery.