A trifecta of uncertainty – from the Iran war to AI disruption and private credit – is crushing financial stocks this year. While shares of Goldman Sachs and Wells Fargo have been caught in the downdraft, their businesses should be largely insulated from these headwinds. However, the actions of the Goldman Sachs Club and Wells Fargo have been painted with the same brush as the broader financial sector. In a major reversal from last year’s strength, Goldman is down 11% in 2026, while Wells is down more than 20% so far this year. We don’t believe these stock declines reflect the fundamentals of the business. It is a difficult pill to swallow, but temporary, and that is why we believe that these titans of Wall Street should emerge well from the current challenges. War with Iran The Iran war has caused volatility in bank stocks due to concerns that rising oil prices could hurt both consumers and business customers and lead to reduced profits. Rising oil means higher gasoline and diesel prices paid at the pump and higher prices for the fuel required to fly airplanes, all of which can create an inflationary shock. In that context, it could be difficult for the Federal Reserve (even under the likely next Fed chief, Kevin Warsh), to reduce interest rates. This could be bad news for consumers looking to lower borrowing costs, not to mention pressured to pay more to drive and fly to different places. When consumers feel pressured, they tend to control spending, which can lead to taking out fewer loans or defaulting on existing ones. From a business perspective, those higher fuel costs can put pressure on margins, as energy is also a major and unavoidable cost for businesses. Additionally, when business confidence suffers, executives may be more reluctant to pursue acquisitions and initial public offerings. That means they don’t need investment banking services as much. They could also try to borrow less. “All of that essentially means that growth prospects (for banks) could be slower. We could see more defaults if we enter some version of a stagflationary environment,” Bank of America research analyst Ebrahim Poonawala told CNBC in a recent interview. Stagflation occurs when there is weak economic growth, high inflation, and high unemployment. Poonawala, who covers Goldman Sachs, added: “This increases the likelihood of downside risks relative to what was assumed a week or a month ago.” As a more traditional monetary central bank, Wells Fargo is more exposed to credit risks and less to a trading pullback, while Goldman Sachs is more exposed to fewer mergers and acquisitions. Goldman Sachs’ global banking and markets division, which includes its trading fees, accounted for about 77% of total revenue last quarter. Revenue from investment banking, its largest segment, rose 25% year over year in the fourth quarter. Weakness in deals is less of a concern for Wells Fargo’s growing investment banking business. IB is located in the company’s corporate and investment banking division, which accounted for 21% of total revenue last quarter. Wells Fargo has taken big steps to expand its investment banking presence in order to further diversify its results and not rely as much on interest-based income, such as loans, which are at the mercy of the Federal Reserve’s rate movements. Of course, those risks exist. But, as Investing Club portfolio analyst Zev Fima said, “We still like the banks because we think this conflict with Iran can be resolved quickly enough to avoid a recession.” In an ironic tailwind for the moment, swings in the stock market are actually a boon for Goldman’s trading desk, which collects fees by offering clients complex options and swaps to hedge their risks. “This volatility is Goldman’s world,” Jim Cramer said Tuesday. He added: “I really want to buy it here. Right here.” On Thursday we put together a list of stocks to buy and Goldman Sachs was on it. Jeff Marks, the Club’s director of portfolio research, noted that Goldman Sachs was trading at its lowest price-earnings multiple in years: less than 14 times its estimated earnings per share for the next 12 months. On Friday, Jim said on CNBC: “I think Wells is coming back. They’re having a good quarter.” Wells Fargo’s forward P/E is also at a historically low multiple of less than 11 times. AI Disruption Risks The growing adoption of AI has presented another cause for concern among banking investors. Financial stocks sank last month due to a viral report from Citrini Research, which described an apocalyptic scenario for AI adoption. The document said unemployment rates could rise to 10% by 2030 if machines replace white-collar jobs, resulting in a huge dent in economic growth and much less consumer spending. Concerns about AI are overblown, according to Jim, describing the Citrini report as a “dystopian story” and “a reach.” He argued that many more jobs will be created than destroyed as AI becomes more integrated into the workforce. We even bought more shares of Wells Fargo on February 24 during that AI-induced sell-off and the stock returned to our buy rating equivalent to 1. This is because we believe AI can be a real positive for banks and increase profits. Both Wells Fargo and Goldman have incorporated generative AI into their own businesses to make them more efficient. In February, CNBC reported that Goldman had been working with Anthropic to create artificial intelligence agents to automate a number of internal functions. Before that, Wells Fargo expanded its AI leadership team in January with the appointment of Faraz Shafiq as head of AI products and solutions. Shafiq previously worked at Amazon Web Services, Verizon, AT&T, and Google. Concerns over private credit Wall Street has been nervous about the impact of private credit on banks. Another overreaction. “I know things are bad with the banks,” Jim said Friday. “These are loan packages, not all of which are bad.” High-profile redemption requests for private credit funds have been received throughout 2026. Blue Owl restricted withdrawals from one of its retail-focused funds last month, raising fears about a liquidity mismatch. Following the Blue Owl news, asset managers Blackstone and BlackRock reported high redemption requests. Morgan Stanley and a lesser-known firm called Cliffwater also reported spikes in redemption requests. The fast-growing private credit market has taken off in recent years as investors seek higher-yielding, more flexible credit alternatives to government or corporate bonds. Wall Street’s biggest banks are hurt because private credit funds borrow money from them to increase the size of the loans they offer. However, Goldman Sachs and Wells Fargo are well capitalized, as seen in the results of the Federal Reserve’s stress test last summer. Their businesses are also diversified and private markets are not the main fee drivers for either bank. In fact, Tomasz Piskorski, a professor at Columbia Business School, said banks are “reasonably well protected” from fears of contagion from private credit. According to Piskorski, there is a misconception that private credit funds represent a serious risk because banks are backed on average by 10% equity (equity) and 90% debt (liabilities). In theory, this means that even a 10% drop in the value of a bank’s assets can potentially put the company at risk of insolvency. However, the same logic does not apply to private credit funds because they are not structured the same way. Instead, Piskorski argued that these vehicles require much more capital. Unlike traditional banks, private credit funds are funded with approximately two-thirds equity and one-third debt on average. “That means asset values would have to fall by much more than half before banks…lending to private credit funds would be hurt,” Piskorski told CNBC in an interview. “In other words, private credit funds have very large capital reserves. Therefore, it is not the banks, the lenders to the private credit funds, that are really exposed, but the limited partners that provide capital to these private credit funds,” Piskorski added. However, private credit was a concern for us when it came to BlackRock, a stock we exited at the beginning of the month because these concerns became a major distraction. While it did not represent a large part of its business, we held the shares with the thesis that private markets would become more common among retail investors. However, recent industry-wide weakness could create a roadblock to broader adoption. While acknowledging the problems with private credit, Jim said Friday: “We’re going to look back and say this wasn’t 2007.” That year, borrowing and leverage problems were building ahead of what would lead to the 2008 financial crisis and the Great Recession. (Jim Cramer’s Charitable Trust is long GS, WFC. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable fund’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION OR DUTY EXISTS OR IS CREATED BY VIRTUE OF THE RECEIPT OF ANY INFORMATION PROVIDED IN RELATION TO THE INVESTMENT CLUB. 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