To The Moon

Bullish Outlook on Macro Perspective

The Q2 2025 earnings season for the six major U.S. banks—Citi, JPMorgan, Wells Fargo, Goldman Sachs, Bank of America (BAC), and Morgan Stanley—presents a unique opportunity to assess whether the financial sector can sustain its remarkable rally, with bank stocks having soared in 2025 amid a shifting economic landscape. While initial Q2 earnings estimates were cut earlier this year, reflecting concerns over tariff impacts and economic uncertainty following the Trump administration’s policy shifts, this adjustment could paradoxically set the stage for these banks to outperform expectations. Historical data from Q1 2025, where all six banks beat consensus earnings despite tariff-related headwinds, suggests a pattern of resilience that could carry into Q2. For instance, JPMorgan reported an 8% revenue increase to $46.01 billion in Q1, driven by a 48% surge in equities trading revenue, while Goldman Sachs saw a 27% rise in the same metric, hinting at a potential repeat if market volatility persists.

The macroeconomic environment further bolsters this bullish case. As of July 2025, interest rates appear to be stabilizing after a volatile period, with the Federal Reserve hinting at a possible rate cut by September, which could enhance net interest income (NII) for banks like Bank of America, where analysts project a 1% Q2 NII increase. The S&P 500’s 4% gain in Q2, coupled with a resurgence in mergers and acquisitions (M&A) activity—up 18.5% year-over-year through May 2024—signals a robust environment for investment banking, a strength for Goldman Sachs and Morgan Stanley, which saw Q1 investment banking revenues soar 51% and 150% respectively. Additionally, the lifting of Wells Fargo’s asset cap in Q2 could unlock new growth, with projected EPS of $1.40, a 5% increase from last year, reflecting optimism about its recovery.

However, this outlook isn’t without skepticism. The establishment narrative of a “soft landing” promoted by banks like Bank of America may overlook rising credit loss provisions—JPMorgan set aside $3.1 billion in Q3 2024, more than double the prior year—indicating potential stress in loan portfolios amid high interest rates and a cooling economy. Tariff uncertainties and geopolitical tensions could also dampen corporate confidence, as noted by Goldman Sachs’ CEO David Solomon, who highlighted muted investment banking activity due to “material risks.” Yet, the banks’ ability to adapt—through cost-cutting (Citi’s $2.5 billion restructuring savings) and diversified revenue streams—suggests they could turn volatility into opportunity. JPMorgan’s “animal spirits” moment, as described by CFO Jeremy Barnum, and the sector’s projected 40.9% earnings growth in Q4 2024, underscore a momentum that could propel Q2 results to new highs, particularly for leaders like JPMorgan and Goldman Sachs, whose technical stock strength above key moving averages signals investor confidence.