How tariff-fueled market downturns made Wall Street rich
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Volatility spiked in the second quarter of 2025, amid record policy uncertainty thanks to tariffs.
- Wall Street used this to its advantage, with Goldman Sachs raking in the best trading revenue in history.
Why it matters: The record quarter offers a lesson for investors about not fearing market down days, which are frequently close in proximity to the best market days as well.
What they're saying: "[P]olicy uncertainty drove clients to reposition portfolios and recalibrate risks across asset classes," according to Goldman Sachs CEO David Solomon on the second quarter earnings call with analysts.
By the numbers: Goldman's equity trading desk generated $4.3 billion in revenue, a 36% jump from a year prior.
- That beat the street's expectations by over $600 million.
- Morgan Stanley's revenue beat was also driven in part by equity revenue coming in at $3.7 billion, up from $3 billion a year prior.
- Citigroup's trading revenue increased 16% from the prior year, which also helped the bank deliver increased overall profits.
Zoom in: How did Wall Street do it? While this isn't an exhaustive list, here are some of the strategies discussed on earnings calls:
- Equity intermediation, otherwise known as being the middleman between institutional buyers and sellers.
- Portfolio financing, or lending to big-money clients.
- Volume — a lot of clients wanted to position themselves well amid volatility.
Yes, but: It's not just the banks that won this quarter.
- Retail investors earned their way out of the perceived "dumb money" club by staying invested amid the market volatility.
- Sources were asking in April, how retail got it so right?
The bottom line: Turns out, the big banks were getting it right at the same time.
Editor's note: This story has been corrected to note that earnings comments from Goldman Sachs were made by CEO David Solomon (not CFO Denis Coleman).
