(Reuters) – Investment banking is expected to experience a slowdown in the first half of 2025 as market volatility creates uncertainty for CEOs, boards and sponsors planning to negotiate and launch deals, Morgan Stanley Research said in a note on Thursday.

We now expect capital markets activity to remain subdued for the first half of the current year and begin to pick up more meaningfully in the third quarter of 2025, analysts said in the note.

The recent market pullback, elevated market volatility and economic uncertainty are impacting the strong market conditions seen at the start of the year, the note added.

Investment banking activity had picked up in recent months, with Wall Street executives cheering the business-friendly tone of President Donald Trump’s administration.

However, U.S. mergers and acquisition activity in the first two months of 2025 has seen just 1,603 deals signed through Friday, making it the slowest pace by volume since 2009, Dealogic data showed.

“In our bear case, we see 24%-47% downside among Midcap Advisors and 9%-27% downside among Money Center Banks,” the note said.

(Reporting by Jaiveer Singh Shekhawat in Bengaluru; Editing by Alan Barona)