Investment Banks Set to Gain in Trump 2.0? ETFs to Benefit

Investment banks are set to thrive under President Donald Trump’s second term, according to Kingsley Jones, founder and chief investment officer at Jevons Global. Speaking to CNBC’s Martin Soong, the Australian investor expressed optimism about Wall Street’s performance, highlighting a favorable environment for financial stocks.

Regulatory Changes and Trade Policies Favor Banks

Jones pointed to Trump’s pro-business stance, which includes loosening deal-making regulations and implementing trade tariffs that could refocus business activity on the United States. These factors, he argued, create opportunities for financial institutions to expand.

Among his top picks, Jones named JPMorgan JPM and Goldman Sachs (GS) as standout investment opportunities. This puts focus on JPM-heavy exchange-traded funds (ETFs) like iShares U.S. Financial Services ETF IYG, iShares U.S. Financials ETF IYF and Financial Select Sector SPDR Fund XLF. The Goldman-heavy ETF includes iShares U.S. Broker-Dealers & Securities Exchanges ETF IAI.

Strong Market Performance and Revenue Projections

The banking sector recently recorded a historic quarter, driven by heightened trading activity and increased deal-making around the Presidential election. Trump’s return to office is expected to further boost investment banking revenues, with Coalition Greenwich forecasting total income to reach $316 billion in 2025, according to Reuters. Additionally, M&A bankers could generate $27.6 billion in fees, making it one of the most profitable years in the past two decades.

Goldman Sachs CEO David Solomon reinforced this positive sentiment in January, attributing the surge in deal-making to “a meaningful shift in CEO confidence” and a more favorable regulatory landscape under Trump’s leadership.

Global M&A Activity

Global M&A demonstrated signs of recovery in the fourth quarter, with 9,765 deals announced — marking the highest number since Q1 of 2023. The second half of 2024 also recorded deal volumes at $1.1 trillion, the maximum since H1 of 2022, when M&A activity began to decline following hawkish central banks (read: Upbeat Year Ahead for Mergers and Acquisitions? ETFs to Consider).

The United States accounted for 54% of global M&A activity on an annual basis, generating $7.2 trillion from U.S. targets compared to $6.3 trillion from non-U.S. targets. Despite the appealing M&A market in the United States, fourth-quarter activity declined by nearly 30% compared to the same period in 2023, due to tough year-over-year comparisons.

Financials led the fourth-quarter performance with $90.1 billion, driven by four transactions in the top 10 for the quarter, followed by materials and industrials. Easing financial market conditions, fueled by the Fed's moderate level of interest rate cuts and moderating inflation, play a key role in driving the M&A market.

Any Wall of Worry?

Trump tariffs may stoke inflation all over again, leading the Fed to act less dovish in the coming days. In that case, deal makers won’t be able to enjoy the easy financing backdrop fully. Still, the broader market calls for an upbeat deal-making environment. Investors can cash in on the trend with the help of ETFs like NYLI Merger Arbitrage ETF MNA, AltShares Merger Arbitrage ETF ARB, FirstTrust Merger Arbitrage ETF MARB and Proshares Merger ETF MRGR.

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