Where is the promised "bull market"? Trump's 2.0 "sluggish" opening caught Wall Street off guard
After the inauguration of the Trump 2.0 government, Wall Street is facing an unexpectedly low downturn, with stock trading and the merger and acquisition market significantly cooling down, and the number of transactions dropping to the lowest level since 2014. The new antitrust officials are cautious about large merger cases, and the uncertainty surrounding tariff plans has led to hesitance in corporate investment decisions. Despite the overall poor market performance, major bank stocks have risen, with JP Morgan and Goldman Sachs seeing price increases between 6% and 15%, outperforming the S&P 500 index's 3% rise
Trump 2.0 reappears with an "unconventional path," catching Wall Street off guard.
In January of this year, stock trading activity and the merger and acquisition market on Wall Street both showed significant cooling, with the number of U.S. merger and acquisition deals even dropping to the lowest level since 2014. This situation stands in stark contrast to the optimistic expectations triggered by Trump's election last November. At that time, the market generally believed that the new government would spur a merger boom, relax regulations on Wall Street, and bring about a more favorable policy environment.
However, the reality has been unexpected. In the second week of the Trump administration, the new antitrust officials signaled that they would not approve large merger cases and blocked a potential merger between Hewlett Packard Enterprise and its competitor Juniper Networks. Additionally, the uncertainty surrounding the new government's tariff plans has left many companies hesitant in making large-scale investment decisions and in their expectations of borrowing costs. UBS Group CEO Sergio Ermotti stated:
"From a geopolitical perspective, the uncertainty around tariffs is indeed creating some uncertainty, which may weaken all of our abilities to execute (deals)."
Moreover, high corporate valuations have also somewhat suppressed the activity in the transaction market. According to media reports quoting THL Partners co-CEO Scott Sperling, this may have weakened the financial returns that certain types of mergers and transactions could bring.
However, despite the overall poor market performance, the stocks of major Wall Street banks have remained strong. Since the beginning of January, the stock prices of JPMorgan Chase, Goldman Sachs, Citigroup, and Wells Fargo have risen by 12% to 15%, while Bank of America and Morgan Stanley have seen increases of 6% to 9%, all outperforming major stock indices. In contrast, the S&P 500 index has only risen by about 3% so far this year.
Another unexpected challenge facing Wall Street comes from the political arena. Previously, President Trump publicly questioned Bank of America CEO Brian Moynihan at the World Economic Forum in Davos, accusing banks of canceling banking services due to customers' personal beliefs or involvement in the cryptocurrency industry.
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