JPMorgan Says Investors Are Overlooking the Upside to Wall Street Banks T...

Why It Matters

The note signals that investors may be undervaluing the near‑term earnings upside of the two largest U.S. investment banks, potentially creating a buying opportunity as market volatility fuels trading and IPO fees.

Key Takeaways

• JPMorgan upgrades GS and MS to outperform ahead of Q2 earnings
• EPS forecasts raised 5% for Goldman, 2% for Morgan Stanley
• Price targets lifted to $900 (GS) and $187 (MS)
• Anticipated 21% rise in stock trading revenue YoY
• SpaceX IPO could boost investment‑banking fees for both banks

Pulse Analysis

The investment‑banking landscape is entering a rare growth phase, driven by a confluence of volatile markets, robust equity issuance, and a pipeline of marquee IPOs. The MSCI World index’s 10% year‑to‑date gain underscores strong equity returns, while geopolitical tensions in the Persian Gulf have spurred heightened commodity hedging activity. Both dynamics translate into higher trading volumes and fee income for banks that sit at the center of market making and advisory work, positioning Goldman Sachs and Morgan Stanley to capture disproportionate upside.

JPMorgan’s research team, led by Rob Dwyer and Ayano Tsunoda, has quantified that optimism with a temporary "outperform" rating and revised earnings forecasts. Adjusted EPS expectations for 2026 have been nudged up 5% for Goldman and 2% for Morgan Stanley, prompting price‑target hikes to $900 and $187 respectively. The analysts project a 21% year‑over‑year surge in stock‑trading revenue and a 7% increase across fixed‑income, commodities, and currencies, outpacing European peers whose P/E multiples linger in the mid‑single digits. This earnings momentum, combined with a multiplier effect from IPOs like SpaceX, suggests the U.S. banks are priced for growth despite premium valuations.

For investors, the short‑term catalyst is clear: the upcoming Q2 results on July 15‑16 could validate JPMorgan’s bullish outlook, potentially sparking a price rally. However, the upside is not without risk; continued market turbulence could compress spreads, and the reliance on high‑profile deals introduces deal‑flow concentration risk. Still, the blend of strong trading revenues, expanding balance‑sheet financing, and a favorable IPO environment makes Goldman Sachs and Morgan Stanley compelling candidates for tactical exposure in a sector where earnings momentum is rare.