Trump, the IPO Market and Why Our Financial Holdings Are Moving
The outlook bodes for a more industry-friendly regulatory environment and more IPOs.
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As we wait for Nvidia’s NVDA Jensen Huang and his CES 2025 keynote this evening, we have some new developments following today’s S&P Global SPGI December Service PMI report, which are lifting our shares of Morgan Stanley MS and Bank of America BAC.
The Fed also announced Michael Barr will step down from his role as the Federal Reserve’s vice chair for supervision by February 28 or sooner if President-Elect Trump appoints a successor.
While Barr will remain on the Fed’s Board of Governors, this action by him will freeze any bank regulatory actions until Trump names someone to the vice-chairman role. The longer Trump waits to name a replacement, the longer the freeze on bank regulations, which could be part of his communicated industry-friendly stance toward banks. We see this as pointing to further watering down of the Basel III proposal that has been winding its way through Washington, D.C. and needs to be signed off by the Fed, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. And yes, Trump also has the opportunity to nominate the directors of the FDIC and OCC.
On top of what is shaping up to be a more regulatory-friendly environment for banks, reports point to private equity (PE) firms fueling the continued rebound in the IPO market. The why behind that? PE firms are increasingly under pressure to return cash to their investors. In the chart below, we can see the strong 2024 position Morgan Stanley had in equity underwriting as well as the one in M&A transactions.
With an eye toward Bank of America, it participates nicely in those two arenas but has a stronger position in bonds. Fortunately, Goldman Sachs sees companies issuing $1.5 trillion or more in U.S. bonds this year, up from $1.4 trillion in 2024. Their thinking is that, “If the economy is growing if companies are growing, if balance sheets are growing, you will see debt to finance that growth.”
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At the time of publication, TheStreet Pro Portfolio was long NVDA, BAC and MA.
