The numbers are still coming in, but one thing seems certain from banks' first quarter results — there was good money to be made when things turned ugly in financial markets.
During the first quarter, the S&P iTraxx Crossover index of European credit default swaps and the Vix index of US equity volatility rose to eight month peaks. The S&P 500 index greeted President Trump's arrival by falling 4%.
Yet at most major banks, revenue beat expectations. In many cases, the big win was swollen trading revenues as desks exploited iincreasingly wild market swings.
To say there was a transfer of wealth from Main Street to Wall Street is probably an exaggeration.
But there can be no doubt that while the 401(k) pension plans of many Americans were taking a battering, the trading divisions of US investment banks made a killing — several piled up their best markets earnings for a decade.
It was not only US banks with strong trading capabilities and low exposure to medium-sized companies and retail banking — think Goldman Sachs and Morgan Stanley — that reaped the rewards from fears of a global trade war.
Japan’s biggest investment bank, Nomura, managed a 24% surge in equity trading revenue, driven by activity in the Americas.
Deutsche Bank proved there were windfalls going in fixed income too (it closed equity trading in 2019) as its fixed income and currencies takings gained 17%.
Even the European banks trying to be more boring — such as wealth management-focused UBS — could not help but profit handsomely from Trump's turmoil.
Turnover in UBS's markets division jumped 32%, while trading revenues at Barclays rose 16%.
The latest results should serve as a reminder to CEOs who have pinned their hopes of growth on corporate finance.
When things get messy on Main Street it is the markets business that rescues profits. Under a Trump presidency, that may turn out to be more than a one-off windfall.
The next quarterly earnings — which will include the much more extreme trading of the first 10 days of April after Trump unleashed his tariff onslaught — may show that very soon.