A period of turbulence in the stock markets is proving advantageous for banks’ equities traders.
JPMorgan Chase & Co. is expected to increase revenue from equities trading by over 30% this quarter compared to the same period last year, as stated by sources familiar with the situation. If these projections hold true, it would surpass the firm’s previous record of $3.3 billion set four years ago.
This trend may result in even greater revenues for Goldman Sachs Group Inc. and Morgan Stanley, both of whom often compete for the top position in stock trading within the industry. While JPMorgan’s increase is notably substantial, Goldman Sachs’s equities division is also performing better than it did last year, when it earned $3.3 billion in the first quarter, according to anonymous sources not authorized to speak publicly.
The market fluctuations triggered by sudden policy announcements from President Donald Trump are creating opportunities for banks, despite broader economic concerns. These market movements have negatively impacted hedge funds, hindered merger discussions, and affected consumer confidence.
The strong performance of equities desks highlights their transformation since the 2008 financial crisis. Their earnings rely less on taking balance sheet risks and more on facilitating increased client trading during periods of price volatility. Individual stock movements have sparked a surge in derivatives trading, consequently boosting bank revenues.
Representatives from JPMorgan and Goldman Sachs did not offer comments on the situation.
The positive impact on banks contrasts with the challenges faced by multistrategy hedge funds — large, versatile investment platforms designed to achieve gains regardless of market conditions. The largest of these, Ken Griffin’s Citadel and Izzy Englander’s Millennium Management, experienced unusual losses in February and continued to decline in early March.
Other areas of investment banking are experiencing difficulties. Some dealmakers are disappointed by the lack of activity they anticipated with Trump’s return to the White House. Instead, they find themselves dealing with the uncertainty caused by unexpected tariff announcements. The global volume of new transactions announced this year is lower than at the beginning of 2024.
Morgan Stanley Co-President Dan Simkowitz acknowledged this on Tuesday, noting that merger and acquisition announcements and new equity issuance are currently “on pause” as clients evaluate Trump’s policies, according to his comments at a conference organized by the bank.
Prior to 2008, major US banks engaged in proprietary stock trading to generate billions in revenue, rather than simply processing client orders. However, with new regulations limiting risk-taking, banks have focused on other business areas, such as providing financing to clients looking to leverage investments for enhanced returns.
Three banks have dominated the stock-trading sector over the past decade. Morgan Stanley led the market for seven years starting in 2014 before relinquishing its position to Goldman Sachs.
Together with JPMorgan, these three banks collectively generated almost $36 billion from their equities operations last year, widening the gap with their competitors.
This report was originally published on Fortune.com.
