The stocks of the biggest Wall Street banks are rallying at the end of the second quarter, defying the gloom that settled over the industry as the quarter began.

Dealmaking froze in the weeks following President Trump’s April 2 “Liberation Day” tariff announcement, but has since recovered on the back of some red-hot IPOs and sizable mergers.

“I do think investment banking specifically is a tale of 2 quarters, one that started slow, really pausing in a big way and now it’s picked up,” Morgan Stanley (MS) CEO Ted Pick said at a conference hosted by his firm in early June.

The stock of the largest US bank, JPMorgan Chase (JPM), reached a record high at the end of last week and could go higher this week after JPMorgan, Morgan Stanley and 20 other big banks passed an annual Federal Reserve stress test.

The results of that test released Friday demonstrated that all big banks have enough of a buffer to withstand a severe recession, boosting their case for dramatic rollbacks in capital rules and other regulatory constraints from the Trump administration.

Investors in bank stocks are also encouraged by a bounce back of M&A and IPOs in May and June after virtually all activity came to a halt in April. About 30% of companies said in a May PwC survey that they paused or revisited pending deals due to tariffs.

Worldwide investment banking revenue since the start of 2025 through June 27 — $44.8 billion — is slightly higher compared to the first two quarters of last year, according to Dealogic data. The second quarter by itself is down 4% from the same period last year.

Certainly there are also some reasons for unease as banks continue to face a number of unknowns after the run up in their stocks. Most big banks are near or have exceeded their 2025 highs initially set in the weeks after Trump’s inauguration.

Baird analyst David George offered some caution last week when he downgraded JPMorgan from neutral to underperform.

“We realize we are fighting the tape here, and understand that JPM is a best-in-class franchise, with dominant share in all of their businesses,” he said in a note, adding that “we simply think that expectations are super high here.”

‘A noticeable increase in momentum’

The banks’ tale of 2 quarters is expected to show up in the earnings of the biggest banks on Wall Street when they start to report their second-quarter results in two weeks.

Collectively, investment banking revenue at Bank of America (BAC), JPMorgan, Goldman Sachs (GS), Morgan Stanley and Citigroup (C) is expected to fall 6% from the year ago period to $7.7 billion, according to analyst estimates.