Morgan Stanley President and CEO James Gorman speaks during the Institute of International Finance Annual Meeting in Washington, October 10, 2014.
Joshua Roberts | Reuters
Morgan Stanley CEO James Gorman said he has more confidence in the market than the rest of Wall Street, seeing a return to trading shortly after the Federal Reserve stopped raising interest rates.
“I’m very confident that when the Fed pauses, trading activity and underwriting activity will pick up. In fact, I’d bet a whole year on that,” Gorman said on an earnings call. on Tuesday. “We don’t think we’re entering a dark age. Whatever negative things in the world are out there. That’s not our view.”
His comments came as his New York-based company reported fourth-quarter earnings that beat Wall Street expectations, was driven by the bank’s record wealth management revenues and growth in its commercial business. Shares traded up 7% on Tuesday following the results.
Despite the overall better-than-expected results, Morgan Stanley’s investment banking business suffered a severe decline amid a decline in IPOs as well as debt and equity issuance.
Investment banking revenue hit $1.25 billion in the fourth quarter, down 49 percent from a year ago. The bank attributed the drop to a significant drop in global equity underwriting volumes and lower completed M&A transactions.
Gorman said trading activity will pick up as financial conditions begin to ease. He said the Fed’s next move would likely be to raise rates by less than 0.25 percentage points, followed by a pause. He added that he is not sure if the central bank will cut rates this year.
“I’m a little more confident about the medium-term outlook for the market,” Gorman said. “We want to make sure we’re positioned to grow. This is going to change. M&A underwriting will come back, I’m very positive about that. So we want to be well positioned. for that.”
The Fed raised its benchmark interest rate to a target range of 4.25% to 4.5%, a 15-year high, marking its most positive policy moves since the early 1980s.
“There’s a lot of money waiting to be put to use. Our job is to regulate the flow of capital between those who don’t have it and those who need it. So I’m actually pretty confident about the outlook,” Gorman said. .
