Why Big Banks Thrived Amid Q2’s Wild Stock Moves

Q2 2025 Stock Market Overview: Volatility and Its Impact

The second quarter of 2025 (April to June) was marked by significant market turbulence, primarily driven by policy uncertainties and geopolitical tensions. Still, it ultimately delivered positive returns for most major asset classes. This “wild ride” stemmed from key events like the U.S. administration’s announcement of aggressive tariffs on April 2, dubbed “liberation day,” which triggered a sharp selloff, with the S&P 500 dropping 12% in the following week and U.S. 10-year Treasury yields rising 50 basis points.

 The tariffs, larger than anticipated and reciprocal in nature, escalated trade war fears with China and other partners. Additional volatility came from the ongoing war in the Middle East, increased OPEC oil production, and concerns over fiscal policies like the “One Big Beautiful Bill Act,” which could add $3-5 trillion to federal debt.

 However, a 90-day tariff pause and progress on trade deal principles with China allowed markets to recover, supported by resilient economic data and a weakening U.S. dollar (DXY down 7.1%).

Despite the ups and downs, the quarter ended on a high note for equities. Developed market equities returned 11.6%, with the S&P 500 up 10.9% in local currency terms.

 Mega-cap tech stocks, often called the “Magnificent 7,” outperformed significantly with an 18.6% return, driving much of the gains.

 Emerging markets also fared well, returning 12.2% in dollar terms, boosted by currency appreciation in Asia.

 Fixed income assets saw more modest gains, with global inflation-linked bonds at 4.7% and investment-grade credit at 4.4%, while commodities dipped -3.1% amid oil price fluctuations (ending at $68 per barrel).

 Overall, S&P 500 companies were expected to report a 5% year-over-year jump in earnings per share (EPS), the slowest growth since Q4 2023, with early results tracking at 4.8% based on initial reports.

Why It Was Great News for Big Banks

This volatility proved to be a boon for major U.S. banks, as it fueled higher trading volumes, increased client activity, and revived dealmaking. Banks’ trading desks capitalized on swings in equities, fixed income, currencies, and commodities, leading to revenue surges that often exceeded Wall Street expectations. The earnings season, which kicked off on July 15, 2025, with reports from JPMorgan, Wells Fargo, and Citigroup, highlighted this trend.

 As JPMorgan CEO Jamie Dimon noted, while the U.S. consumer remains “basically fine,” significant risks like tariffs, geopolitical conditions, high fiscal deficits, and elevated asset prices persist.

 Nearly all big banks reported profit beats, with trading and investment banking fees providing a key lift amid a post-tariff-pause rebound in market sentiment.

Here’s a breakdown of key big bank earnings for Q2 2025, based on reports released in mid-July:

In summary, while the quarter’s volatility created challenges for broader markets—evident in initial selloffs and commodity dips—it supercharged big banks’ trading operations, leading to robust earnings that underscored their resilience in uncertain times. This trend continued into early Q3, with stock futures rising on the back of these reports and cooling inflation data.

 Investors should monitor ongoing trade negotiations and geopolitical developments, as they could influence future quarters.