At a recent financial conference, leading bank executives highlighted how shifting U.S. policies under President Donald Trump are stirring uncertainty among corporate and consumer clients alike.
The economy appears stable for now, the mixed signals from trade negotiations and evolving regulations have left many unsure about future prospects.
“We’re seeing a lot of anxiety among corporate clients,” said Vis Raghavan, Citigroup’s head of banking and executive vice chair. Similarly, Bank of America CEO Brian Moynihan noted, “The core consumer is holding up better than small businesses and the middle market,” underscoring the uneven impact of current economic conditions.
The updates reflect a more cautious outlook compared to the optimism that swept Wall Street following Trump’s election. As the U.S. engages in on-again, off-again trade negotiations, both corporate and individual clients are grappling with the consequences. Despite the uncertainty, JPMorgan Chase CEO Jamie Dimon struck a more balanced tone, stating, “Corporate sentiment dropped, but it’s coming back up, and business remains okay.”
Consumer and Corporate Dynamics
For consumers, the picture is less dramatic. Mike Santomassimo, finance chief at Wells Fargo, reported no significant deterioration in consumer portfolios, a sentiment echoed by Moynihan. However, challenges persist for small businesses and middle-market firms, which remain more sensitive to policy changes and economic fluctuations.
On the corporate side, many clients are delaying investment and borrowing decisions. “Uncertainty has caused businesses to pause investments and inventory builds, particularly given the rising cost of borrowing,” Santomassimo explained. He added that muted loan growth is expected for the remainder of the year as businesses tread cautiously.
Revenue Impacts
The ripple effects of these shifts are evident in banks’ financial projections. Bank of America anticipates a sharp 20% drop in second-quarter investment banking fees to $1.2 billion. In contrast, sales and trading are expected to deliver stronger results, benefiting from heightened market volatility.
Wells Fargo, recently freed from its asset cap restrictions, foresees limited loan growth for 2025. Meanwhile, Citi is bolstering its reserves, setting aside hundreds of millions more in the second quarter. The bank expects mid-to-high single-digit growth in investment banking fees and markets revenue.
JPMorgan’s Dimon warned of potential deterioration in key economic indicators, including a slight dip in employment and a potential uptick in inflation. “There’s a chance real numbers will deteriorate soon,” he noted.
A Changing Landscape
Bank executives also pointed to broader shifts in the economic and regulatory environment as contributors to the cautious outlook. Initial expectations for a business-friendly environment fueled by tax cuts and deregulation have been tempered by the administration’s trade policies and regulatory unpredictability.
The trade wars and cuts to government programs, coupled with stricter immigration enforcement, have raised concerns about U.S. economic growth and the labor market. These factors are leading to a reevaluation of business strategies across the board.
For instance, while regulatory rollbacks initially buoyed expectations among bankers and asset managers, the resulting uncertainty has tempered enthusiasm. Dimon acknowledged that while business fundamentals remain intact, the broader environment is prompting clients to take a more cautious approach.
Market Sentiment
Investor sentiment mirrors the cautious tone of the banks. The SPDR S&P Bank ETF has dipped 1.2% this year, underperforming the S&P 500, which has risen 2.7%. This divergence underscores the hesitancy among market participants regarding the financial sector’s near-term prospects.
Navigating the Road Ahead
Despite these challenges, bank leaders remain committed to navigating the complexities of the current environment. By managing risks and capitalizing on areas of strength—such as market volatility—banks aim to mitigate the impact of policy shifts on their bottom lines.
For wealth advisors and RIAs, these developments underscore the importance of proactive client engagement. Helping clients understand the evolving economic landscape and adjust their strategies accordingly will be key to preserving and growing wealth in uncertain times.
