LIVE MARKETS-'Everything is awesome' no more: US banks face 'modest recession' reality

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'EVERYTHING IS AWESOME' NO MORE: U.S. BANKS FACE 'MODEST RECESSION' REALITY

Several U.S. banks may lower their profit estimates this earnings season due to weak consumer sentiment and underwhelming dealmaking activity, according to Raymond James, marking a sharp reversal from the post-election optimism that boosted markets.

Declining equity valuations, alongside a muted recovery in M&A and IPOs, will pressure fee income as tariffs and "other aggressive posturing" erode consumer confidence and push businesses into a wait-and-see approach, the brokerage said on Wednesday.

President Trump's vow to ease merger regulation had investment banking executives projecting a bright outlook for 2025. But the brokerage's comments reflect that just months into his term, those hopes have dimmed.

The administration is expected to impose new tariffs later on April 2 — which the president has touted as "Liberation Day" — raising fears of a trade conflict and prompting businesses to put acquisition plans on hold amid growing uncertainty.

"We enjoyed the short-lived 'everything is awesome' sentiment following the election," the brokerage said. "Such positive vibes dramatically improved bank investor sentiment... However, such euphoria was short-lived."

Investors are increasingly expecting at least a "modest recession" at some point this year and it has become much more important to be selective about bank stocks, the analysts added.

So far in 2025, the KBW regional banking index .KRX has fallen nearly 7%, while the benchmark S&P index .SPX is down 4.2%.

Banks kick off the reporting season next week, with earnings updates from JPMorgan Chase JPM.N, Wells Fargo WFC.N and Morgan Stanley MS.N on deck.

(Niket Nishant)

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