Goldman Sachs’ and Morgan Stanley’s chief executives said that they saw “green shoots” within their struggling investment banking business, which had implemented mass dismissals due to higher interest rates.
Wall Street firms have been experiencing one of their leanest periods ever, even by the feast-tofamine standards of investment banking. There is a lack of capital market activity and deals due to the difficulty of buyers and sellers in agreeing on price.
After several quarters with falling investment bank revenue, Morgan Stanley’s James Gorman, and Goldman’s David Solomon, said that the market was improving.
“My gut says, and I know this is not a great read, but over time it has served me well, I’d say I feel that we have bottomed out on this. Gorman told an industry conference organized by Morgan Stanley, “I just feel like the tone is a bit better.” “We are clearly seeing more green sprouts. “I’m having more conversations with CEOs.”
Gorman, who intends to step-down from his position as CEO in the next 12 month, said Morgan Stanley would “unlikely,” pursue any further mass dismissals after it reduced thousands of jobs in recent months.
He said that he could not say for certain, but it was unlikely the bank would return to the previous world.
Solomon told CNBC that Goldman also saw “green shoots”. Solomon said that Goldman was also seeing “green shoots” of activity. I always say that it takes between four and six quarters for a reset. He said, “We’re about five quarters into it.”
I would expect the capital markets to increase as we move into 2024. People need capital. They can postpone some of these activities, but they cannot do so indefinitely.
Cava, a fast-casual restaurant chain that plans to list this week at the New York Stock Exchange, increased its price range on Monday.
Gorman said it is unlikely that the Federal Reserve, which raised its benchmark interest rate from 5 to 5.25 percent to between 5 and 5,25 percent this year, will cut rates in 2019. However, rates could start to fall “at some stage” in 2024. They may then settle at 2 to 3 percent.
Solomon warned that the US would still be faced with a difficult environment of low economic growth and persistent inflation, even if it avoided a recession.