LIVE MARKETS-Jefferies' weak Q1 results stoke fears for Wall Street's investment banks

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JEFFERIES' WEAK Q1 RESULTS STOKE FEARS FOR WALL STREET'S INVESTMENT BANKS

Jefferies' JEF.N disappointing first-quarter results will likely unsettle banking investors, fueling concerns that Wall Street’s dealmaking rebound may be slower and more uneven than expected.

The investment bank’s shares fell 7% in premarket trading after its profit missed estimates, weighed down by a sharp drop in bond trading revenue and sluggish deal activity.

The results suggest that the long-awaited recovery in investment banking is still out of reach - an ominous sign for larger rivals, including Morgan Stanley MS.N, Goldman Sachs GS.N and JPMorgan Chase JPM.N, set to report earnings next month.

Earlier this month, Oppenheimer scrapped its forecast for U.S. investment banking growth in 2025, slashing its 32% projection amid tariff uncertainty.

"Investment banking is a notoriously cyclical business, which tends to boom as markets rise, animal spirits run and IPO and M&A activity runs hot" said Russ Mould, investment director at AJ Bell.

While Jefferies managed to notch gains in advisory and debt underwriting, the overall weakness underscores how global geopolitical tensions and shifting economic policies are keeping capital markets on edge.

"President Donald Trump's aggressive trade policies have introduced significant political and economic uncertainty making independent and private equity (PE) backed companies hesitant to pursue M&A amidst a more uncertain than usual landscape," said Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors.

Brokerage Morgan Stanley has also said that market volatility and economic uncertainty, fueled by shifting tariff policies, will likely delay the investment banking rebound.

Jefferies' results serve as an early indicator of broader industry trends, and if these larger players echo similar weaknesses, it could further dampen hopes for a dealmaking revival in 2025.

Wall Street banks have already started trimming headcount and are poised to cut more jobs if economic uncertainty continues to weigh on dealmaking in the months ahead.

(Manya Saini)

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