Big banks have big problems

Wall Street titans may have already made their thoughts on tariffs clear via social media, but now the big banks they run will reveal exactly how much their businesses are being hurt.

JPMorgan Chase, Wells Fargo, and Morgan Stanley kick off the new earnings season tomorrow morning—making them the canaries in the coal mine for the rest of Wall Street.

While the steep levies that President Trump has promised—and then partially Uno reversed—don’t tax banks directly, they certainly hurt clients. After all, market volatility and overall economic health are intricately linked with Wall Street’s business.

Lower consumer spending threatens to slow down demand for loans and credit card usage, taking a bite out of banks’ bottom lines. Investment banking activities like taking a company public or guiding a major merger are huge business lines for banks that have dried up dramatically this year.

Let’s not forget growing fears of a recession. In the case of an economic downturn, businesses and individuals alike usually reduce their borrowing—and fewer loans means fewer profits for banks. Even if a recession doesn’t materialize, fear that one lays ahead may have already eaten into loan activity.

A preview of what’s to come

The S&P 500 Bank Index has fallen nearly 12% in 2025, and some analysts already expect bank earnings to be underwhelming. Then again, a large chunk of the tariff-related economic upheaval has come after the conclusion of the first quarter, so tomorrow’s earnings may not reflect the new reality.

That’s why, even more than the earnings numbers themselves, investors will be closely watching what executives say about how Liberation Day tariffs are affecting their clients, dealmaking, and how they see the next quarter playing out amid the chaos.

Ironically, no one is more pessimistic about banks than the banks themselves.

Morgan Stanley cut its outlook on large- and mid-cap banks from “in-line” to “attractive” given tariff-induced market turmoil. Specifically, analysts there downgraded Goldman Sachs down to “equal-weight” from “overweight,” though they upgraded Bank of America to “overweight” from “equal-weight,” arguing that the stock is cheap.

JPMorgan also downgraded a slew of banks its analysts cover, including Bank of America, Wells Fargo, M&T Bank, and Keybank.

Looks like the Wall Street snake is eating its own tail.—LB