Blame it on a dearth of drama.
The largest Wall Street banks have tumbled in New York trading this week as JPMorgan Chase (JPM) and Bank of America (BAC) disclosed double-digit declines in their trading businesses during April and May, which may pressure second-quarter earnings. The drop is largely because of a difficult comparison to a year ago, when Great Britain shocked markets by deciding to pull out of the European Union, a move that fueled a fixed-income trading boom.
In the three months through June 2016, such trades climbed 35% at JPMorgan, 26% at Bank of America, 20% at Goldman Sachs (GS) and 14% at Citigroup (C) . A subsequent drop in the pound's exchange rate coupled with real estate mogul Donald Trump's surprise victory in the U.S. presidential election and two rate hikes by the Federal Reserve to sustain a surge in fixed-income trading that lasted nine months before fading.
"There's not a lot to trade around right now," JPMorgan CFO Marianne Lake said at a Deutsche Bank conference in New York on Wednesday. "There aren't a lot of market themes, and there haven't been many idiosyncratic events. We need a few more of them."
The New York-based bank's markets businesses, which include stock trading as well as fixed-income transactions, have fallen about 15% from the same period a year ago, Lake said.
"We did quite well in 2016," she added. "That's a high bar. We will work hard very hour of every day to replicate or beat it, but it is a high bar."
Bank of America, based in Charlotte, N.C., has seen similar trends, CEO Brian Moynihan said at a separate conference. Its trading businesses declined 10% to 12% in April and May.
At Goldman Sachs, client trades related to volatility were subdued in the three months through March, a trend that has continued through the second quarter, said David Solomon, the former investment banking executive recently promoted to co-COO.
"There are obviously four more weeks left to go," Solomon told analysts at the Deutsche conference, declining to provide more detail. "You know and we know this stuff can ebb and flow."
The declines prompted Morgan Stanley analyst Betsy Graseck to cut earnings-per-share estimates at the biggest Wall Street banks by as much as 9%, according to a note Thursday.
At Thursday's close, Goldman had tumbled 3.8% for the week; JPMorgan had dropped 2.7%, Bank of America had dipped 2.6%; Citi had fallen 1.6% and Morgan Stanley had slipped 0.5%.
The quarter's slower trading volumes build on developments in March, when Morgan Stanley CFO Jonathan Pruzan said questions about the "timing and achievability" of the Trump administration's policy goals, such as curbing post-financial crisis regulations and cutting taxes resulted in "more sporadic client activity,"
On March 24, Trump and House Speaker Paul Ryan pulled a bill repealing Obamacare -- which they had described as a necessary precursor to tax reductions -- after they were unable to convince enough members of their own party to support it. A revised bill later passed the House, but lacks backing in the Senate because of changes that would cut health coverage for elderly taxpayers.
Meanwhile, heightened scrutiny into Russia's role in the 2016 campaign, including contact between the country's government and Trump aides, has further hampered the president's agenda, especially after his firing of FBI Director James Comey.
Still, surprises from the administration, shifts in the Federal Reserve's plan to decrease securities investments that quadrupled its balance sheet to $4.5 trillion or an upset in British parliamentary elections June 8 could roil markets in the coming month -- and boost trading volumes.
At present, there's no particular reason for the downward trend in April and May trading to change, "particularly given the strength of our June last year," JPMorgan's Lake noted. "But anything can happen in a month."
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