Trump 2.0: Wall Street Hits Speedbumps, Banks Grilled on 'Debanking'

M&A Deals Slow to Start as Trump Faces Challenges

The new Trump administration has faced unexpected hurdles that have dampened Wall Street's optimism for a boom in mergers and acquisitions (M&A). Data from LSEG shows that announced M&A deals within the US reached their lowest level in January since 2014.

Antitrust officials have signaled their intent to scrutinize large mergers, blocking a potential deal between Hewlett Packard and Juniper Networks. Additionally, the president's tariff plans have created uncertainty for businesses, making it difficult to predict borrowing costs and plan major investments.

Banks Face Pressure on 'Debanking' Practices

Wall Street has also faced political heat in the early weeks of the Trump presidency. President Trump publicly confronted Bank of America CEO Brian Moynihan over allegations that banks are "debanking" customers for their political beliefs or involvement in the cryptocurrency industry. Both Bank of America and JPMorgan Chase, the nation's two largest banks, have denied these claims.

Tax Break for Hedge Funds Faces Scrutiny

The White House has indicated its intention to close the carried interest tax deduction, which allows investment managers to pay a lower capital gains tax rate on their income. Lobbyists for the private equity and hedge fund industries are expected to fight to preserve this tax break.

Banks Remain Optimistic

Despite the challenges, banks remain optimistic that addressing the "debanking" issue could ultimately benefit them if regulators relax restrictions that force them to close certain customer accounts. Industry lobbyists are pushing for regulatory clarity in this area.

High Valuations May Also Dampen M&A

The historically high level of corporate valuations may also be contributing to the slower pace of dealmaking, as potential acquirers may be reluctant to pay premiums for companies that are trading at elevated prices.

Key Stock Performance

Since the beginning of January, major bank stocks, such as JPMorgan Chase, Goldman Sachs, and Citigroup, have outperformed major stock indexes.