Although Saul Martinez’s team of analysts predicted that investment banking fees would rise, their projections for Goldman Sachs and Morgan Stanley already account for a roughly 30% increase over 2024 levels. Martinez wrote in a note that both banks should be held rather than outperformed because “we think market expectations are much higher than they have been, leaving room for disappointment.”

As investors anticipate that United States President-elect Donald Trump’s policies, such as tax cuts and less regulation, will spur economic growth and increase bank stocks, bank stocks experienced a sharp decline following his victory in the United States presidential election.

Since November 2024, Goldman Sachs and Morgan Stanley have both increased by 14% and 13%, respectively, the day after the US election, when the KBW Bank Index jumped by nearly 10%.

Martinez’s hesitancy is hardly unique, as some analysts, such as Mike Mayo of Wells Fargo and Co., are bullish, calling the catalyst a “watershed moment” and seeing the potential for a “super cycle” in capital markets.

After the rally, JPMorgan Chase was downgraded from outperform to perform by Oppenheimer analysts, who cautioned that the bank had guided to lower net interest income.

The index that follows the top 34 US banks, which includes Citigroup, Morgan Stanley, JPMorgan Chase, and Goldman Sachs are on course for their best year since 1997. After holding onto its gains after the election, the index is predicted to reach a new high soon.

Martinez clarified in his note that he is even more optimistic about fundamental outlooks today than he was previously, despite the downgrades. He also increased his estimates for earnings per share for both banks to account for higher investment banking, asset and wealth management fees, and “much higher buybacks.”

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