Goldman Sachs Group Inc (NYSE:GS, XETRA:GOS) and Morgan Stanley (NYSE:MS) are set to post strong first-quarter results, driven by a surge in trading activity amid volatile markets, according to a note from Jefferies.
The brokerage raised its earnings estimates for both firms, expecting Goldman Sachs to report earnings per share of $15.60 and Morgan Stanley $2.87, increases of 11% and 7%, respectively, though both remain slightly below consensus forecasts.
Trading is expected to be the standout performer. Jefferies pointed to “profitable volatility” fueled by geopolitical shocks, shifting interest rate expectations, tariff aftershocks and elevated hedging activity. US equity volumes rose 27% year-over-year, while volatility spiked in March, boosting client engagement across asset classes.
Goldman Sachs is projected to generate about $9.9 billion in trading revenue, up 15% from a year earlier, while Morgan Stanley is expected to bring in roughly $7.5 billion, an 11% increase. Fixed-income desks also benefited from widening spreads and heightened rate uncertainty.
Investment banking activity remained solid, led by a rebound in mergers and acquisitions. Global M&A fees rose 19% year-over-year, with Goldman Sachs capturing the top market share at 11.9% and Morgan Stanley at 8.2%. Advisory revenues are expected to jump sharply, up 75% at Goldman and 70% at Morgan Stanley.
However, not all segments are firing equally. Equity capital markets remain subdued due to market volatility and geopolitical tensions, while loan markets have been pressured by spread widening and dislocation. Debt capital markets held up better, supported by strong investment-grade issuance.
Overall, Jefferies expects total investment banking revenue to rise 35% year-over-year at Goldman Sachs and 39% at Morgan Stanley.
Looking ahead, investors are likely to focus on how sustainable the trading strength proves, as well as on balance sheet positioning and capital allocation. Upcoming Basel III regulatory changes could also come into focus, though Jefferies views them as broadly favorable for both firms.
Outside of trading, wealth and asset management divisions may face some pressure, particularly from softer client activity and margin compression, but Jefferies is still positive on both banks given their ability to capitalize on the current market backdrop.