Oppenheimer has revised its outlook for U.S. investment banking revenue, no longer anticipating growth this year and significantly reducing its previous estimate of a 32% increase due to uncertainty surrounding tariffs.
The brokerage downgraded the ratings of Goldman Sachs, Jefferies, and Carlyle, citing concerns about a decline in dealmaking activity.
This shift reflects a broader sentiment among Wall Street analysts who, once optimistic about a rebound in mergers and acquisitions (M&A) activity following President Trump's return to office, are now unsettled by the ongoing trade war.
According to Oppenheimer, the current market conditions have prompted companies to reassess their M&A strategies, despite having capital available for investment and stabilized interest rates.
This uncertainty will negatively impact investment banks, which rely on substantial earnings from M&A advisory fees associated with structuring, negotiating, and executing deals.
A thriving dealmaking environment is also essential for investment firms seeking to monetize assets and redeploy capital.
Chris Kotowski, an analyst at Oppenheimer, expressed concern that the current uncertainty regarding tariffs, coupled with a fiscal "detox" and the disruption of long-standing trade and security arrangements, is likely to lead to a slowdown in M&A activity.
The Trump administration's stance has begun to dismantle global trade norms that have governed the world economic landscape for decades, affecting even close allies like Canada and the European Union.
JPMorgan Chase CEO Jamie Dimon previously emphasized the risks associated with tariffs and indicated that companies might suffer from the prevailing uncertainty.
Morgan Stanley has also noted that market volatility and economic uncertainty driven by shifting tariff policies are likely to hinder the anticipated recovery in investment banking.
Jefferies is set to report results next week, providing an early insight into the performance of the investment banking sector as it approaches 2025.