(Bloomberg) - Morgan Stanley Chief Executive Officer Ted Pick started summing up his outlook after Wall Street’s banner year for trading with four words: “The setup is ideal.”
After Wall Street’s five giant banks reported a record $134 billion of trading revenue from last year and an upswing in dealmaking, Pick and peers agreed it’s poised to continue — albeit with caveats.
“As a student of these businesses for decades, I would bet you that 2021 is not the ceiling,” Goldman Sachs Group Inc. CEO David Solomon said, referring to the last record year for lenders’ trading businesses. “The world is set up at the moment to be incredibly constructive in 2026 for M&A and capital markets activity, and I think the likely scenario is it is a very, very good year.”
President Donald Trump’s turbulent policy changes and trade talks have kept investors on edge — but for bank traders that has kept paying off as clients rush to reposition their portfolios. At the same time, his administration’s deregulatory efforts and the Federal Reserve’s interest-rate cuts are reviving a moribund environment for mergers and acquisitions — quickly filling dealmakers’ pipelines.
As Morgan Stanley and Goldman posted quarterly results Thursday after reports from their largest rivals earlier in the week, the market-centric firms added to predictions for another bumper year for Wall Street operations. That contrasted with other corners of banking, such as credit-card units that have come under threat as Trump demands a cap on interest rates. Industry executives have been fielding questions about how they may respond to that, even as they themselves await information from the White House.
But for market desks at least, the good times may continue.
The trading surge is in “middle innings,” Pick told analysts, borrowing a baseball analogy. “We’re in that sweet spot right now as opposed to the pure investment-banking business, which is in the earlier innings.”
Goldman executives described their backlog for advisory, debt and equity underwriting as the highest in several years — and among the strongest ever.
Shares of Morgan Stanley and Goldman both rose the most since April, gaining 5.8% and 4.6% respectively, after they disclosed results.
The nation’s six biggest banks — also including JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. — collectively posted their largest annual profit since 2021 this week. They also paid out more than $140 billion in dividends and buybacks last year, surpassing a record set in 2019.
Despite the windfall, several firms that have been spending heavily on tech upgrades emphasized that they are now focusing more on honing efficiency — which may include job cuts. Already, the group eliminated about 10,600 positions last year, the most in almost a decade, and some have signaled they may go further.
But when it came to the outlook for Wall Street, optimism was the tone. At JPMorgan, Chief Financial Officer Jeremy Barnum discussed the “constructive market dynamics, which is reflected in our pipeline.” At Bank of America, CFO Alastair Borthwick said “investment-banking fees showed good momentum.”
Caveats included references to high asset prices — with the implication that stocks and other investments that have soared in value could end up falling dramatically, leading to a retreat in trading activity, if not losses on the banks’ own books.
And even if the economy looks solid heading into 2026, there is “an enormous amount of risk” that could unexpectedly change everything, JPMorgan CEO Jamie Dimon warned. “We have to deal with the world we got, not the world we want. And I’ve never — we don’t guess about the outcome.”
That’s one reason why bank leaders demurred from more specific earnings predictions. At Morgan Stanley, executives indicated they are holding off on raising any targets, until perhaps later in the year.
“There is a chasing dragon element to this, of course,” Pick said. “You hit some of the targets once, and you feel you’ve got to sort of bump and raise.”
By Katherine Doherty
