Wall Street banks only just reported their largest-ever take from stock trading as the first few months of President Donald Trump’s presidency resulted in convulsions across asset classes — and the necessity for institutional investors globally to position themselves for a new regime. Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America each recorded record equities trading revenue in the first quarter, with the first three generating about $4 billion in revenue each. With Citigroup and Wells Fargo included, the six biggest U.S. banks collectively committed $16.3 billion of stock trading in the quarter, 33% more than a year ago and more than during previous times of disruption, such as the 2020 pandemic during the coronavirus or the 2008 global financial crisis.
The show, which propelled all banks but Wells Fargo past quarter expectations, was called “spectacular,” “extraordinary” and “awesome” by analysts on conference calls last week. It’s a spin on the hoped-for Trump boom for Wall Street. Trump’s second term was supposed to be good for Wall Street dealmakers, the investment bankers working on billion-dollar deals and high-profile IPO listings. Rather, activity in deals has been lukewarm, and the largest winners so far have been sitting on bank’s trading floors.
Though equities traders posted the largest gains in the first quarter, as reported by their earnings statements, fixed income staff also enjoyed greater revenue on increased activity in currencies, commodities and bond markets. “As long as the volatility persists — and there’s no indication that it will anytime soon — equities trading desks should stay busy enough,” James Shanahan, a bank analyst with Edward Jones, said in a telephone interview.
While investment banking has remained muted as corporate leaders put off making strategic decisions amid ongoing uncertainty, professional investors have “a lot to play for” as they seek to rack up gains, Morgan Stanley CEO Ted Pick said Friday.
Booming trading results will help big banks as they set aside potentially billions of dollars for soured loans as the economy weakens further, Shanahan said. JPMorgan executives said Friday that their models assume U.S. unemployment will rise to 5.8% later this year. Unemployment stood at 4.2% in March, according to data from the Labor Department. The environment leaves regional banks, which mostly lack sizeable trading operations, in a “tough spot” amid stagnant loan growth and elevated borrower defaults, Shanahan added.
The first quarter is typically a busy one for trading as investors at hedge funds, pensions and other active managers start their performance cycles anew. That was especially true this year; hours after his January swearing-in ceremony, Trump said he would soon implement tariffs on imports from Canada and Mexico. The next month, he began escalating trade tensions with China, while also targeting specific industries and products like automobiles and steel.
The dynamic — in which Trump introduced, and then scaled back sweeping tariffs with profound implications for American businesses — reached a fever pitch in early April, around his so-called Liberation Day announcements. That’s when markets began making historic moves, as both equities and government bonds whipsawed amid the chaos. The heightened activity levels could mean that the second quarter is even more profitable for Wall Street’s giants than the first.
“We obviously saw significant moves in equity markets as people positioned for a different kind of trade policy during March” that led to “higher activity for us in a variety of ways,” Goldman CEO David Solomon told analysts on Monday.
So far in the second quarter, “the business is performing very well and clients are very active” Solomon said. Wall Street has evolved since the 2008 financial crisis, which consolidated trading and investment banking among fewer, larger firms after Lehman Brothers and Bear Stearns were wiped out.
Led by folks including Morgan Stanley’s Pick — who is credited with overhauling the firm’s fixed income business and taking its equities franchise to new heights before he became CEO last year — Wall Street’s dominant trading desks are providing ever-faster execution and larger credit lines to professional investors all over the world. Rather than wagering house money on bets, they have leaned more to facilitating trades and providing leverage for clients, meaning they profit from activity, whether markets go up or down. “We’ve been working with clients nonstop,” Pick said Friday. “For all of the concerns about what could come down the road in the real economy, the market-making and the ability to transact to clients as they up and down their leverage levels has been very orderly.”
