Why Wall Street Is Firing on All Cylinders

SPEAKER_1 (0:00)

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Sabrina Siddiqui (0:26)

The latest results from big banks show Wall Street firing on all cylinders. Plus, why New York City's office market is soaring.

Peter Grant (0:34)

Employers are getting their workers back to offices, and as a result, they need more space.

Sabrina Siddiqui (0:40)

And Gen Z protesters have felled another government as Madagascar's military seizes control. It's Tuesday, October 14th. I'm Sabrina Siddiqui for The Wall Street Journal, filling in for Alex Osala. This is the PM Edition of What's News, the top headlines and business stories that move the world today. In its latest forecast, the International Monetary Fund said the global economy is on pace to grow by 2.6% this year, down from 3.6% growth last year. Tariffs, inflation and other threats are clouding the world economic outlook. For the US economy, its forecast is for 1.9% growth, slightly better than predicted earlier this year, but down from 2.4% recorded in 2024 The IMF says the weakening US labor market and protectionist trade policy are among the signals for potential problems ahead. But even with those concerns, Wall Street is surging. Dealmaking, trading and corporate lending are gaining steam and fueling profits at the nation's biggest banks. Results out today from Goldman Sachs, JPMorgan, Citigroup and Wells Fargo all beat profit and revenue forecasts as third quarter earnings season got into full swing. Goldman is on pace for its best year ever in its main investment banking and markets division. JPMorgan is on track to make over $50 billion in annual profit for the second year in a row. And BlackRock, the investment management giant, is sitting on a record $13.5 trillion in assets under management. Alexander Saeedy, The Wall Street Journal's reporter covering banking and finance, joins us now with more. Alex Goldman, JPMorgan City, all those banks seem to be benefiting from a booming Wall Street. How did that show in their results?

Alexander Saeedy (2:26)

Yeah, so all the three big banks reported profit and revenue that were beyond investors' expectations coming out of this sort of trade war uncertainty of the second quarter. In the third quarter, a lot of banks' clients felt very confident, willing to make investments, buy other companies, try to divest firms that they don't want to own anymore. And at the same time, the consumer is looking relatively healthy. So overall, the picture is looking okay, and banks stand to directly benefit from that.

Sabrina Siddiqui (3:01)

But shares in Goldman Sachs and JPMorgan fell. What is worrying investors?

Alexander Saeedy (3:06)

Investors had already been told that the results would be even better than they might have been expecting. So as one analyst put it to me, they may have gone in expecting two ice cream scoops and came away with one. JPMorgan, just as an example, is at very high valuations relative to where it's been in past years. So even moderately good news as opposed to excellent news could mean that the stock goes down a percentage point or two.

Sabrina Siddiqui (3:33)

But the outlook isn't clear cut. This is JPMorgan CFO Jeremy Barnum.

Peter Grant (3:38)

You think about this moment as a moment of high uncertainty.

SPEAKER_1 (3:41)

I think tipping point is a little bit too strong a word. But certainly as you look ahead, there are risks.

Sabrina Siddiqui (3:49)

Alex, what did the banks have to say about economic uncertainty?

Alexander Saeedy (3:52)

Well, it varies bank to bank, CEO to CEO. JPMorgan's Jamie Dimon, who's always been a skeptic, continues to say he believes asset prices are elevated. There's a complex range of risks that are emerging, especially in geopolitics that are difficult to quantify and hard to protect the bank against. But at the same time, in terms of real time impact, there's not a lot to say quite yet. The lower end of the consumer is stretched a little bit more than they were probably a year ago. If inflation comes back, that's going to dent everyone. So the outlook is relatively mixed, but the current state of the economy appears to be pretty good.

Sabrina Siddiqui (4:35)

That was The Wall Street Journal's Alexander Saeedy. Thanks, Alex.

Alexander Saeedy (4:38)

Thank you.

Sabrina Siddiqui (4:39)

Federal Reserve Chair Jerome Powell highlighted weakness in the job market, reinforcing investor expectations that more interest rate cuts were coming. At an economics conference, Powell said the labor market has, quote, demonstrated pretty significant downside risks. Hopes for more rate cuts helped give US stocks a boost, along with signs that trade tensions between the US and China were not, in fact, spiraling. Following a lower open, the Dow moved into positive territory after a top US trade official said President Trump and Chinese leader Xi Jinping are still on track to meet later this month. Indexes closed mixed, with the Dow up less than half a percent, the S&P 500 down 0.2 percent, and the Nasdaq falling almost 0.8 percent. In commodities, gold prices hit yet another all-time high. Coming up, why New York City's office market is thriving again, while much of the country is plodding along? That's after the break.