M&A Rebound Fizzles: How to Play Morgan Stanley Stock Now?

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Swayta Shah

Fri, Mar 21, 2025, 9:49 AM 5 min read

The resurgence in mergers and acquisitions (M&As) anticipated by investors following President Donald Trump’s re-election and expectations of favorable regulatory changes are yet to materialize. As such, shares of Morgan Stanley MS, one of the most well-known global investment banks, have tanked 4.2% this year. It has fared worse than its close peers, Goldman Sachs GS and JPMorgan JPM.

Also, in the same time frame, the industry it belongs to has edged down 0.5% and the S&P 500 index has also fallen 4.2%.

MS YTD-Month Price Performance

Image Source: Zacks Investment Research

Entering 2025, a major rebound in M&As was expected, with deal-making activities likely to grow in the mid-20s. This optimism stemmed from pent-up demand, stabilizing or declining interest rates, tightening credit spreads and strong public market valuations. Further, the Trump administration was regarded to be more business-friendly, with an expected rollback of stringent oversight that could mark the end of the prolonged regulatory scrutiny.

But what has transpired so far this year is quite different. Deal-making activities have paused as ambiguity over the tariff and ensuing trade war has resulted in extreme market volatility. These developments have led to economic uncertainty, data indicating a slowdown in the U.S. economy and mounting inflationary pressure. Hence, amid such a backdrop, companies are rethinking their M&A plans despite stabilizing rates and having significant investible capital.

This will significantly impact investment banking firms such as Morgan Stanley, JPM and GS, which generate billions in revenues from M&A advisory fees.

Year 2024 marked a turnaround for the global investment banking (IB) sector after two years of weak performance. Global M&As rebounded as clarity on macroeconomic matters, the higher likelihood of the soft landing of the U.S. economy and interest rate cuts globally drove deal-making activities. Morgan Stanley saw a 35% jump in its IB fees.

During the fourth-quarter 2024 earnings call in January, CEO Ted Pick expressed strong optimism about sustained momentum, citing a robust M&A pipeline. However, the outlook has since shifted, with the company now anticipating a delay in the IB recovery. As a result, advisory income is expected to take a hit in the near term.

Earlier this week, Bloomberg reported that Morgan Stanley intends to cut roughly 2,000 jobs later this month to improve operational efficiency. The layoffs will take place across the firm, excluding 15,000 financial advisers.