[LONDON] Up and down Wall Street, executives are starting to come to terms with a new reality: Donald Trump is not delivering the long-awaited rebound in mergers and acquisitions (M&A) they hoped he would.
Inside JPMorgan Chase, Goldman Sachs and Bank of America, executives are considering revising down internal revenue projections for their advisory businesses for this year. Such moves across the industry could portend job cuts in the second half if the environment does not improve.
Even before this week, UBS Group has begun asking senior investment bankers to draw up lists of employees who could be included in potential cutbacks, according to sources with knowledge of the matter who asked not to be identified, discussing information that is not public. Bank of America has trimmed some investment-banking roles across London in recent weeks, though the cuts are not related to the slowdown, sources familiar with the moves said.
It’s a sharp reversal from just five months ago, when bankers had high hopes that Trump’s plans to introduce sweeping tax cuts and do away with large swaths of regulation would unleash a wave of dealmaking and capital-markets activity.
Instead, his policy changes have caused markets to go haywire and reignited inflation fears, causing many companies to pause any plans for mergers. Trump delivered the latest blow to confidence on Wednesday (Apr 2), when his plan to roll out a raft of tariffs on major trading partners around the world wiped out some US$3 trillion of stock-market value and caused the US dollar to tumble by the most in at least two decades.
Already, the havoc in markets has caused companies including Klarna Group and Stubhub Holdings to pause their initial public offerings. That spells bad news for legions of equity underwriters across Wall Street and the fees banks normally collect from such work.
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“We are now facing a number of simultaneous hits to the global economy in general, and the US financial sector in particular,” said Tom Kirchmaier, professor at the Centre for Economic Performance at the London School of Economics. The tariffs, he said, will likely cause a slowdown in economic activity, which would “mean that there will be substantially lower financial-advisory work to be done”.
Spokespeople for Bank of America, Goldman Sachs, JPMorgan and UBS declined to comment.
At the start of the year, investment bankers around the world were hopeful that Trump would fan the flames of the nascent recovery in M&A that got underway in 2024. The thinking was that cheaper borrowing costs – along with the pickup in equity markets at the time – would give companies both the confidence and the capital to do deals.
Instead, many bankers say clients would now prefer to wait to see how some of Trump’s most audacious policies play out before they commit to doing any big deals. Sentiment among US chief executive officers sank to its lowest level in more than a decade in March, with the drop reflecting “notable uncertainty regarding tariffs, geopolitical uncertainty, government layoffs and broader unpredictability”, according to Bloomberg Intelligence.
“The outlook for global M&A has been muddied by trade and economic uncertainty that’s sunk CEO sentiment to a decade-plus low,” Neil Sipes and Alison Williams, analysts at Bloomberg Intelligence, said in a research note. “Robust pipelines entering 2025 still support medium-term prospects, though near-term execution bears watching.”
Already, equity analysts have shaved nearly US$600 million off their expectations for how much advisory revenue the five biggest US banks will be able to haul in this year.
Jefferies Financial Group, long considered a bellwether for Wall Street because it typically reports earnings a few weeks before its larger banking rivals, posted a decline in its fiscal first-quarter earnings amid a drop in investment-banking and capital-markets revenue. The firm’s headcount dipped by about 120 in the period.
“Yet again, businesses, investors and the capital markets are experiencing a moment of uncertainty, driving increased volatility and reduced confidence and visibility,” Jefferies CEO Rich Handler and President Brian Friedman said in a note to clients this month. Still, they argued, “the current foundation is nothing like the periods of extreme pain that we have all operated through and managed to come out on the other side of even stronger”. BLOOMBERG
