Wall Street banks are rallying on a 'tale of 2 quarters'

Key Points

• Research suggests Wall Street banks are rallying due to a recovery in dealmaking in Q2 2025.

• It seems likely that the rally contrasts with a slower start in Q1, forming a "tale of 2 quarters."

• The evidence leans toward intensified M&A and IPOs driving the rally, despite earlier tariff-related slowdowns.

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Background
Wall Street banks, including major players like JPMorgan Chase and Morgan Stanley, are seeing their stocks rise at the end of Q2 2025. This rally is attributed to a recovery in dealmaking activities, but it follows a period of uncertainty earlier in the year.

Why the Rally?
The rally is driven by a rebound in mergers, acquisitions, and IPOs, especially in May and June, after a slowdown in April due to tariff announcements. For example, JPMorgan Chase hit a record high and passed the Fed's stress test, boosting investor confidence .

The 'Tale of 2 Quarters'
The "tale of 2 quarters" refers to the contrast between Q1 2025, which started strong in trading but saw dealmaking pause due to tariffs, and Q2 2025, which saw a recovery. While Q1 had robust trading revenues for banks like Morgan Stanley (up 8% in investment banking), Q2 is expected to show a slight revenue drop but is rallying due to intensified dealmaking .

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Comprehensive Analysis of Wall Street Banks' Rally and the "Tale of 2 Quarters"

This note provides a detailed examination of the current rally in Wall Street banks' stocks as of June 30, 2025, and the concept of a "tale of 2 quarters," reflecting the performance in the first and second quarters of 2025. The analysis is grounded in recent financial news, earnings reports, and market analyses, offering a holistic view of the factors driving the rally and the contrasting dynamics between quarters.

Current Rally in Wall Street Banks

As of the end of Q2 2025, the stocks of major Wall Street banks, including JPMorgan Chase , are rallying. This rally is primarily driven by a recovery in dealmaking activities, particularly mergers and acquisitions (M&A) and initial public offerings (IPOs), which had initially frozen following President Trump's tariff announcement on April 2, 2025.

Key drivers of the rally include:

• Dealmaking Recovery: After a pause in April, M&A and IPO activities intensified in May and June, with a May PwC survey indicating that 30% of companies had paused or revisited their deals but later resumed . This recovery has encouraged investors, leading to banks nearing or exceeding their 2025 highs post-Trump inauguration.

• JPMorgan Chase Performance: JPMorgan Chase hit a record high and passed the Federal Reserve's stress test, boosting the case for capital rule rollbacks, which further supported investor confidence .

• Market Sentiment: Despite earlier gloom, the rally defies initial pessimism, with investors encouraged by the rebound in dealmaking, as noted in recent market analyses .

The "Tale of 2 Quarters"

The phrase "tale of 2 quarters" refers to the contrasting dynamics between the first quarter (Q1) and the second quarter (Q2) of 2025 for Wall Street banks, particularly in investment banking and dealmaking activities. This contrast is highlighted by the following:

Aspect	Q1 2025	Q2 2025
Dealmaking Activity	Slow start, with significant pause post-April 2 tariff announcement, as noted by Morgan Stanley CEO Ted Pick .
Trading and Revenue	Strong trading revenues, e.g., JPMorgan Chase and Morgan Stanley reported record equity trading revenue, with Morgan Stanley's investment banking revenue up 8% .
Market Impact	Uncertainty due to tariffs, with corporations cautious, potentially affecting growth .
Outlook	Uncertainty persisted, with potential for corporations to withdraw earnings forecasts and banks building reserves if uncertainty continued .

The "tale of 2 quarters" is thus characterized by a strong start in Q1 for trading revenues, followed by a slowdown in dealmaking due to tariff uncertainties, and then a significant recovery in Q2, driving the current rally. This contrast is evident in the performance of major banks, with Q1 showing robust trading but cautious dealmaking, while Q2 has seen a resurgence in M&A and IPOs, despite expected revenue declines compared to the previous year.

Comparative Analysis and Implications

The interplay between these developments highlights the dynamic nature of the financial markets, with tariff-related uncertainties initially impacting dealmaking in Q1, but a recovery in Q2 driven by market resilience and investor confidence. The rally, while positive, is tempered by expectations of slightly lower investment banking revenues, suggesting that the sustainability of this rally depends on continued dealmaking and economic stability.

For stakeholders, this analysis underscores the importance of monitoring Q2 earnings reports, expected around July 14, 2025, to assess whether the rally can be sustained. The contrast between quarters also reflects broader economic trends, with tariff policies influencing corporate behavior and bank performance, as noted in recent analyses .

Conclusion

As of June 30, 2025, Wall Street banks are rallying at the end of Q2, driven by a recovery in dealmaking activities, forming a "tale of 2 quarters" that contrasts the slower start in Q1 with the rebound in Q2. This analysis, drawing from financial news and market reports, provides a comprehensive view for investors and analysts monitoring these critical market dynamics.

Key Citations

• Wall Street banks are rallying on a tale of 2 quarters

• US bank profits rise, but executives raise more tariff alarms

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