That’s exactly what happened in the fourth quarter, as Wall Street rocketed ahead. That increase was largely due to the deregulatory policies initialized by the Trump administration. These policies have largely pumped up the stock market. They’ve shooed—or maybe bulldozed—corporations to play pack-hunter and prey, often favored mergers or acquisitions. Facilitated largely by institutional investors, including Goldman Sachs and Morgan Stanley, which saw large double-digit profit increases during this time.
One reason is that the Trump administration’s emphasis on eliminating regulatory roadblocks has spurred a new round of consolidated mergers and acquisitions. Corporations are adopting strategic partnerships and takeovers in an accelerated fashion. This transition has sent a wave of opportunity through the financial world. This change has created lucrative new opportunities for investment banks to profit. In the process, they can profit from the growing demand for advisory services related to these transactions.
Additionally, we’ve all seen the dramatic increase in investor fascination with artificial intelligence (AI) firms. Technologies such as ChatGPT are becoming mainstream. Consequently, investors are hungry to fund companies that will receive the greatest rewards from the large-scale implementation of AI solutions. This burgeoning obsession with AI—which isn’t exclusive to U.S. investors—is distorting investment theses and inflating valuations across the tech ecosystem.
Both Goldman Sachs and Morgan Stanley disclosed large growth in their investment fee backlog for Q4. This backlog is an important signal of deal-making activity yet to come that banks are actively sitting on right now. The increase in investment fees is a clear sign that banks are eager to expand. Finally, they are working hard to manage a very robust pipeline of transactions.
This confluence of de-regulation and increased attention to AI is changing the game on Wall Street. Financial institutions are adapting to meet the evolving needs of their clients, capitalizing on the momentum created by favorable policies and emerging technologies.
