Morning Coffee: The Dark Lord of Goldman Sachs has left the building. Christian Sewing's court case

Yesterday, the S&P 500 index soared to an all-time high. So did the small cap Russell 2,000 index. So did Nasdaq 100 index. And so did the Dow Jones 100. Now is not the time for gloomy thoughts about US equities. 

It's appropriate, therefore, that David Kostin, who's worked for Goldman Sachs since 1994 and who has said many gloomy things about them, is leaving his job.

Kostin, who was Goldman's chief US equity strategist, predicted a 'decade of darkness' for US equities only last year when he forecast 3% annualized returns and 1% real terms growth in the S&P 500 until 2034. So far this year, the S&P 500 is up 13%. 

In March 2020, Kostin also forecast that the S&P 500 would fall towards 2,000 from its COVID low of 2,300. In fact, it immediately bounced back and ended the year closer to 3,800. 

In his parting message, Kostin reportedly said he'd been an analyst 40 years and that now seemed a good time to stop. He also said that being an analyst is "challenging" when government policy disrupts forecasts. “We think about three variables in our models: earnings, valuation and money flow. That framework became uncertain after the tariffs...," he reflected. 

Nor is it just volatile government policy that's making the strategist's job harder. The market gets "more efficient all the time," said Kostin. When you're a strategist, adding value means constantly "looking around the corner" while parts are forever moving.

Kostin is not the only strategist with dark thoughts on sunny days who's left a major bank recently. Last year, Marko Kolanovic was pushed from JPMorgan and replaced with a more upbeat junior. Kolanovic has since taken to X/Twitter, where he can be found expressing black sentiments like, "This bubble is one hot inflation or strong jobs print away from bursting."

Kostin is being replaced at Goldman by Ben Snider, an austere looking strategist with a possibly brighter outlook. Last year, Snider declared that the fundamental outlook for equities was "very good," and that “If you own stocks today, we’re not telling you that you should be selling them.”

Kostin is leaving his seat, but won't actually be leaving Goldman. As is often the way with these things, he will become an "advisory director" at the bank and lurk in the shadows. 

Separately, a black thing has caught up with Christian Sewing, CEO of Deutsche Bank. 

The Financial Times reports that Sewing is set to be named defendant in a case involving the overturned convictions of five former Deutsche Bank employees, which is expected to be filed in London's high court soon. 

The employees were accused of false accounting and market manipulation in connection with a €2.2bn 2008 deal involving Monte dei Paschi di Siena. Sewing, who was then head of audit for Deutsche Bank, conducted an internal probe into the deal in 2013.

The consequences of the court case could be expensive. One banker involved has already filed a €152 claim in Frankfurt over damage to his career, and Deutsche has yet to disclose any provisions for the litigation. If Sewing spends a lot of time sidetracked from running the bank by preparations for his defence, it could be more expensive still. 

Meanwhile...

Deutsche Bank says its fixed income trading revenues will be up by a high single digit in the third quarter. (Reuters)

Marco Valla is taking over UBS's global investment banking business from Javier Oficialdegui, who is stepping down. (Financial News) 

Amsterdam-based IMC Trading BV has offered interns in India up to 1.25 million rupees a month ($14,182) this year, a threefold jump from 2024. (Bloomberg) 

Electronic trading is smoothing the FX market. “The ability for volatility to collapse has gone up exponentially. Spreads used to blow out for ages, now we’re back straight within 30 seconds.” (Bloomberg)

Citi's EMEA market share in ECM has improved dramatically and it's gone from 6th to 3rd. JPMorgan's market share in ECM has deteriorated and it's gone from 1st to 4th. Maybe it's all the people leaving for Citi? (Global Trading) 

The benefit of doing an MBA is diminishing. Pre-MBA salaries have increased 6.2%, while projected postdegree earnings increased only 1.7%. (Bloomberg)  

I was earning £100k, but aged 48 I am at the job centre. "My monthly bills are looming and my emergency fund for this very scenario has been spent on sending off my 19-year-old to university.... I need to earn £80k to cover my costs." (The Times) 

Pity the 53 year-old ex-banking recruiters. “There’s nothing worse than walking into my parents’ house and having my dad say, ‘What are you doing with this job search?’” (WSJ)

Remembering the British banker David Potter who constantly smoked cigars, carried a Gucci briefcase and wore a pin-striped suit, braces and black, tasselled loafers. He also had a parrot. (The Times) 

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