MORGAN STANLEY CEO: Investors are ignoring the ‘enormous uncertainty’ created by Trump

Morgan Stanley CEO James Gorman (R) is seen leaving after a meeting with lawyer Davis Polk in New York January 13, 2011. Some of the United States’ top bankers descended on a law firm in midtown Manhattan on Thursday to pitch for what could be one of the largest share sales in history — a secondary offering for bailed-out insurer American International Group (AIG) Inc.
REUTERS/Jessica Rinaldi

The “Trump Bump” is gone for the major bank stocks.

Bank stocks slid Wednesday after Bank of America and JPMorgan executives announced lower second-quarter trading revenues compared to last year. Morgan Stanley CEO James Gorman is now saying the same for his firm.

“We all have similar clients, if not the same clients,” Gorman told Bloomberg in a video interview.

Trading revenue is expected to drop at least 10% in the second quarter at Morgan Stanley, Gorman said. This mirrors a 15% drop in trading revenue at JPMorgan which CFO Marianne Lake announced Wednesday at an investor conference. Bank of America CEO Brian Moynihan also said trading revenues would be lower.

Those executives all point to lower volatility as a key factor for the lower revenues. Brexit and the surprise rise election of Donald Trump contributed to higher uncertainty and volatility in the markets in the summer of 2016, according to Gorman.

“There is enormous uncertainty which typically would breed tremendous volatility and it’s not,” Gorman said.

Economic growth at large is relatively strong, but business-friendly moves promised by Trump, like tax and healthcare reform, have not been implemented as quickly as Trump would have hoped. Normally, this type of political uncertainty would breed higher volatility but that hasn’t happened yet, according to Gorman.

“Right now, people are trying to unravel the conundrum where globally, the economic picture looks relatively robust,” Gorman said. “[But] globally, the geopolitical picture looks relatively unstable. How does one trade in that environment?”

Morgan Stanley shares have not moved much this year, and are trading 0.5% higher than the start of 2017. Shares closed Wednesday at $41.74.