The start of Trump 2.0 is not quite what Wall Street expected.
Dealmaking had its slowest month in January in more than a decade. A prized tax break for hedge funds and private equity firms came under threat. And big banks got grilled over whether they "debanked" certain customers.
These complications were not part of the plan when Donald Trump was elected in November, an event that set off a round of optimistic predictions about an M&A boom, looser rules and a more favorable approach to big Wall Street firms in Washington, DC.
Instead bankers ended January with the lowest number of announced M&A deals within the US since that same month in 2014, according to LSEG data.
Trump’s new antitrust cops also signaled in the administration’s second week that they weren’t going to give a free pass to big mergers by blocking a potential union between Hewlett Packard (HPE) and rival Juniper Networks (JNPR).
And new uncertainties surrounding the president’s tariff plans are leaving many businesses unsure about when to make big moves and what direction borrowing costs might take in the weeks and months ahead.
"The uncertainties that we see from a geopolitical standpoint of view, around tariffs are — is definitely creating a little bit of uncertainties that may dent the capabilities for us, for everybody to execute,” Sergio Ermotti, CEO of UBS Group AG (UBS), told analysts Monday while speaking at a UBS financial services conference in Miami.
Ermotti was also quick to point out that "it's not 1 quarter or 1 month" that will determine the year.
And to be sure, January can typically be a slower time for new deals than other parts of the calendar.
The historically high level of corporate valuations may also be playing a role in a slower pace of dealmaking to start 2025, THL Partners co-CEO Scott Sperling told chof360 Finance Live.
"That's an unusual combination, and that, in and of itself, may have muted some of the financial returns that would be possible from certain types of M&A and certain types of deal doing," Sperling told chof360 Finance Live.
So far the downturn is not pulling down big bank stocks.
Since the beginning of January, JPMorgan Chase (JPM), Goldman Sachs (GS), Citigroup (C) and Wells Fargo (WFC), have risen between 12% and 15% as of Monday while Bank of America (BAC), and Morgan Stanley (MS) are up between 6% and 9%. All have outperformed major stock indexes in that period.
One big unexpected development for Wall Street in the early weeks of Trump 2.0 is a high level of political heat.
Story Continues
First President Donald Trump publicly confronted Bank of America (BAC) CEO Brian Moynihan at the World Economic Forum over a claim gaining traction in conservative circles: that customers are being ‘debanked’ for their personal beliefs or because they are part of the crypto industry.
The president also appeared to include JPMorgan Chase CEO Jamie Dimon in his confrontation. JPMorgan and Bank of America are the nation’s two largest banks. Both companies denied the claims they cut off their services to customers over personal beliefs.
“I don't know if the regulators mandated that because of Biden or what, but you and Jamie and everybody else, I hope you open your banks to conservatives because what you're doing is wrong,” Trump told Moynihan during a question-and-answer session.
The GOP kept a spotlight on the debanking issue last week during hearings before Senate and House committees. Massachusetts Democrat Senator Elizabeth Warren even signaled her support for the topic, saying she agreed with Trump.
Banks are still optimistic, however, that fixing that issue could ultimately turn out to be a positive for them if regulators relax some of their requirements that force banks to shed certain customers.
They have argued that US rules such as the Bank Secrecy Act discourage banks from dealing with customers that are considered high-risk — and that there needs to be clearer regulation on that front.
Industry lobbyists are pressing for that to happen. "An important part of the solution is fixing the regulatory structure," a spokesman for the bank industry advocacy group BPI said in a statement to chof360 Finance.
Lobbyists for the private equity and hedge fund industries may also be unexpectedly busy this year after the White House made it clear that Trump wants to close a tax break known as a carried interest deduction.
It allows investment managers to pay a lower capital gains tax rate on the income they receive from their work as compensation. It’s no small matter, with many capital gains subject to 23.8% taxes while the rate for regular wage income can be double that.
"The president is committed to working with Congress to get this done," White House press secretary Karoline Leavitt said last week.
David Hollerith is a senior reporter for chof360 Finance covering banking, crypto, and other areas in finance.
Click here for in-depth analysis of the latest stock market news and events moving stock prices.
Read the latest financial and business news from chof360 Finance
