Oppenheimer has revised its outlook for U.S. investment banking revenue in 2025, scrapping its previous forecast of a 32% increase. The financial firm now expects no growth in the sector, citing mounting concerns over tariffs and trade policy uncertainties. This decision reflects a growing sense of caution among Wall Street analysts who had been optimistic about a rebound in mergers and acquisitions (M&A) following Donald Trump’s return to the White House.
As part of its revised forecast, Oppenheimer downgraded major players in the investment banking sector, including Goldman Sachs, Jefferies, and Carlyle. The brokerage firm cited the impact of unpredictable trade policies, which could significantly disrupt dealmaking activities. Investment banking firms rely heavily on M&A transactions, which generate billions in advisory fees. If companies hesitate to engage in deals, the revenue streams of these financial giants could take a hit.
Despite having capital to invest and benefiting from stabilized interest rates, many businesses are rethinking their M&A plans. The uncertainty surrounding trade policies has made executives cautious, delaying decisions that could otherwise drive investment banking revenues. According to Oppenheimer analyst Chris Kotowski, concerns over tariffs and disruptions in global trade and security agreements have created an environment where companies are hesitant to commit to major deals.
For investment banks, a strong M&A market is crucial. These firms earn substantial fees from structuring, negotiating, and executing transactions. Additionally, a steady flow of deals helps investment firms monetize assets and reinvest capital efficiently. If M&A activity slows down, the entire investment banking sector could face a prolonged period of sluggish growth.
One of the biggest challenges affecting investment banking forecasts is the Trump administration’s aggressive approach to global trade. The U.S. government has introduced new tariffs and disrupted long-standing trade relationships, affecting key allies such as Canada and the European Union. These changes have added a layer of unpredictability to the market, making companies more cautious about making big financial moves.
Financial leaders have also voiced their concerns. JPMorgan Chase CEO Jamie Dimon previously supported tariffs implemented for national security reasons but has now warned that excessive uncertainty could harm businesses. Morgan Stanley has echoed similar sentiments, stating that shifting trade policies and market volatility are likely to delay the recovery of investment banking.
The investment banking industry will soon get an early look at how 2025 is shaping up when Jefferies reports its earnings this week. These results will provide insights into whether investment banks are already feeling the impact of trade-related uncertainty or if they have managed to navigate the challenges so far.
For now, Oppenheimer’s revised forecast signals a cautious outlook for the U.S. investment banking sector. As companies hold back on M&A deals and trade tensions persist, investment banks may need to brace for a year of stagnation rather than the strong rebound many had initially expected.
It remains to be seen how investment banking firms like B. Riley Financial (NASDAQ: RILY) will navigate the current market challenges in order to thrive despite the existing headwinds.
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