A turbulent period in the stock markets is resulting in a significant profit for banks’ equities traders.
JPMorgan Chase & Co. is expected to increase revenue from equities trading by over 30% this quarter compared to a year ago, according to sources familiar with the situation. If this trend continues, the firm could surpass its previous record of $3.3 billion set four years ago.
This trend could also lead to larger profits for Goldman Sachs Group Inc. and Morgan Stanley, who are known for competing for the top spot in the stock-trading industry. While JPMorgan’s increase is notable, Goldman’s equities unit is also performing well compared to last year when it earned $3.3 billion in the first three months, sources said on the condition of anonymity.
Market fluctuations triggered by President Donald Trump’s sudden policy decisions are presenting a rare opportunity for banks amid economic uncertainty. However, these fluctuations have negatively impacted hedge funds, halted merger talks, and affected consumer confidence.
The strong performance of equities desks reflects their evolution since the 2008 financial crisis. Their earnings now rely more on facilitating client trading in response to market swings rather than taking risks with their balance sheets. This has resulted in increased gains for banks through derivatives trading driven by individual stock movements.
Representatives for JPMorgan and Goldman Sachs have declined to comment on this matter.
While banks are benefiting from this trend, multistrategy hedge funds, such as Citadel and Millennium Management, have experienced losses in recent months due to market conditions.
Some dealmakers are disappointed by the uncertainty caused by sudden tariff announcements, affecting the volume of new transactions globally. Morgan Stanley Co-President Dan Simkowitz mentioned that merger and acquisition announcements and equity issuance are currently on hold as clients evaluate the impact of Trump’s policies.
Prior to 2008, major US banks relied on proprietary trading to generate significant profits. However, regulations have restricted risk-taking, leading banks to focus on other aspects of their businesses, such as providing financing to clients looking to leverage their investments.
Over the past decade, three major banks have dominated the stock-trading industry, with Morgan Stanley holding the top spot for seven years before being surpassed by Goldman Sachs. Along with JPMorgan, these three banks earned nearly $36 billion from their equities businesses last year, maintaining their lead over competitors.
This story was originally featured on Fortune.com
