Investor Mindset Does a Shift-and-Lift to ‘Cautious Optimism’ as Sentiment Recovers from Largest QoQ Pullback in a Decade; A Concerning Consumer in Focus for 2H25
Investor Mindset Does a Shift-and-Lift to ‘Cautious Optimism’ as Sentiment Recovers from Largest QoQ Pullback in a Decade; A Concerning Consumer in Focus for 2H25
Amid Widespread VUCA, Survey Finds Investors Grappling with Tariff Impact and Timing, Suggesting Continued Choppiness and Potential Perception vs. Company Reality Misalignment Ahead
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Big Banks kicked off Q2 earnings season on a positive note, with most delivering top- and bottom-line beats, bolstered by trading revenue amid heightened market volatility, alongside a rebound in deal activity. In contrast with last quarter’s notably cautious tone in the aftermath of April’s “Liberation Day” tariff shock, executives now strike a chord of cautious optimism, echoing findings from our recently published Q2’25 Inside The Buy-Side® Earnings Primer®.
Bank leaders broadly describe a U.S. economy that has proven more “resilient” than anticipated, with companies gaining comfort in a “narrower range of outcomes on global trade”. Still, bank execs remain vigilant heading into the second half, continuing to flag persistent uncertainty and risks tied to tariffs and geopolitical turmoil. Citigroup, for example, noted pauses in capex and hiring among clients, while Bank of America pointed to expectations for a rise in unemployment in the coming months.
Regarding the deal environment, executives report renewed momentum after a sluggish start to the quarter, with corporate clients showing greater willingness to transact and growing desensitization to ongoing uncertainty. In contrast, overall loan growth remains more subdued. Further, some pockets of Q2 strength were partly attributed to trade-related considerations, tariff-driven pull-forward, and increased revolver utilization as clients adapt to a shifting landscape.
Big banks continue to downplay concerns around consumer health, pointing to solid spending and credit trends, albeit with strength skewed more toward high-income cohorts. This potentially comes at a crossroad with commentary from off-cycle companies covered in our “Commencing the Quarter – Q2’25”, where we highlighted companies flagging an acceleration in the trend of higher-income consumers shifting toward value-seeking behavior.
Finally, amid an ongoing focus on managing costs and headcount, progress with AI and automation initiatives featured heavily on this quarter’s calls. Indeed, one analyst quipped during JPMorgan’s Q&A, “This almost sounds like a fintech and AI call.” To that end, several banks highlight broader adoption across their employee base, touting early signs of efficiency and productivity gains.
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