Morgan Stanley and Citi warn of trade slowdown
Wall Street executives warn that a slowdown in trade is close, as client activity has declined significantly and investment banking income has had a difficult start to June.
Wall Street is not hoping for a good second quarter
Morgan Stanley CEO James Gorman said on Tuesday he would be very surprised if they managed to beat first quarter results. Speaking at an industry conference in New York City, he said the past two weeks had been very difficult for the industry, but had seen solid stats before that. He said they weren’t going to have a bad quarter in the securities business. However, he also said that we have to “be realistic with the environment”.
Gorman noted that macro trading was “contested” and even merger activity was “crass”. Citigroup CFO Mark Mason also echoes Gorman’s sentiment. He said second-quarter fixed-income and equity trading income is expected to decline by a percentage from last year. It could be in the “mid single-digit range” alongside investment banking fees which could drop by a percentage in the “mid-teens.” He also said,
“We certainly saw a slowdown in the first quarter after December, characterized by low volatility and heightened uncertainty. Frankly, this slowdown has persisted.
Why do the markets oscillate?
Markets are responding to the latest developments in President Donald Trump’s trade skirmishes. The country is already facing trade problems with China who refuse to calm down. Problems with Mexico have been avoided for now, but the business outlook remains bleak. Chances are the Federal Reserve will take a step as well. David Solomon, CEO of Goldman Sachs Group Inc. recently noted in an interview with CNBC that the quarter has been “up and down.” He also declined to give a forecast of the company’s trading revenue.
Jamie Dimon, CEO of JP Morgan Chase, also warned that their company’s revenue had declined. Citigroup CEO Michael Corbat said last month that market uncertainties are keeping clients away from trading.
Morgan Stanley’s institutional operations reported sales of $ 5.2 billion in the first quarter of the year. This quarter, activity is expected to decline but still bring in around $ 4 billion for the company due to increased stability. The head of the company’s institutional securities business, Ted Pick, said last month that their blue chip brokerage balances had grown rapidly during the year. He noted that the markets still enjoy investor confidence.