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Why Goldman Sachs, E*Trade, and TD Ameritrade Stocks Plunged as Much as 25% in March

By Beth McKenna – Apr 8, 2020 at 8:00AM

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Financial services stocks got killed last month.

What happened

Shares of financial-services firms Goldman Sachs (GS -1.10%), E*Trade Financial (ETFC), and TD Ameritrade (AMTD) plummeted 23%, 25%, and 17.9% respectively, last month, according to data from S&P Global Market Intelligence. For context, the S&P 500, including dividends, dropped 12.4% in March. 

This month, these stocks are up 7.4%, 9%, and 4%, respectively, through April 7. The broader market has gained 2.9% so far this month.

In 2020, Goldman's stock has returned negative 27.4%, while shares of E*Trade and Ameritrade have returned negative 17.4% and negative 27%, respectively. The broader market has returned negative 17.7% so far this year.

Red arrow pointing down on top of rows of hundred dollar bills.

Image source: Getty Images.

So what

Goldman Sachs, E*Trade, and TD Ameritrade probably each have some company-specific things affecting their stock prices. But the biggest reason, by far, for their stock plunges in March is the market's coronavirus-driven sell-off. 

The COVID-19 pandemic has already begun to significantly negatively impact the U.S. and world economies, and many economists and investors believe that a recession is inevitable. Given this expectation that tough economic times are ahead, investors have been fleeing stocks of financial companies, such as investment banks and brokerages, and favoring dividend-paying stocks of recession-resistant companies, such as consumer staples and utilities. This is why shares of Goldman, E*Trade, and Ameritrade fell more than the overall market last month. 

Now what

I think the market's rebound this month is akin to an April Fool's Day joke on investors -- and I believe it will be short-lived. Now is not the time to be buying financial stocks. Of course, others are opining that they're now a bargain. Only time will tell.

What should most individual investors do now? Favor defensive stocks, particularly dividend-paying utilities and food stocks. (Water utility giant American Water Works and electric utility powerhouse NextEra Energy are great recession-resistant stocks.) And if you want to shop for growth stocks, favor those of companies that are profitable and have wide moats, such as Amazon. (Indeed, here are 10 reasons to buy Amazon stock, including that the company should get a permanent boost from the coronavirus pandemic.)

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends NextEra Energy and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

The Goldman Sachs Group, Inc. Stock Quote
The Goldman Sachs Group, Inc.
GS
$291.38 (-1.10%) $-3.24
TD Ameritrade Holding Corporation Stock Quote
TD Ameritrade Holding Corporation
AMTD
E*TRADE Financial Corporation Stock Quote
E*TRADE Financial Corporation
ETFC
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$114.41 (-0.64%) $0.74
NextEra Energy, Inc. Stock Quote
NextEra Energy, Inc.
NEE
$81.08 (-0.09%) $0.07
American Water Works Company, Inc. Stock Quote
American Water Works Company, Inc.
AWK
$134.71 (-1.91%) $-2.62

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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