Shares of one of the most well-known global investment banks, Morgan Stanley MS, have soared 33.4% in the past six months. The stock has fared better than its close peers, Goldman Sachs GS and JPMorgan JPM, which gained 28.9% and 23.1%, respectively. 

Meanwhile, in the same time frame, the financial investment industry has surged 28.5%, and the S&P 500 index advanced 10.4%.

Six-Month MS Stock Price Performance Comparison
 

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Technical indicators suggest continued strong performance for Morgan Stanley. The stock is trading above its 50-day moving average, signaling robust upward momentum and price stability.

Morgan Stanley Stock 50-Day Moving Average
 

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This reflects a positive market sentiment and confidence in the company's financial health and long-term prospects.

Morgan Stanley Under Trump 2.0

It has been a month since Donald Trump took the oath of office as the 47th President of the United States. Following his decisive victory in the November 2024 election, Trump has been vocal about key policy priorities, including tariffs, tax cuts, deregulation and his "America First" vision. The shifts in administrative policy under his second term will inevitably have significant implications — both direct and indirect — on Morgan Stanley.

One of Trump's central economic policies is the imposition of reciprocal taxes on countries that levy tariffs on U.S. imports. This includes key trade partners such as China, Japan, South Korea and the European Union. His tariff plan features a 25% duty on steel and aluminum, increased levies on Chinese goods, and threats of similar tariffs on Canada and Mexico. However, these measures could aggravate inflationary pressures, which remain stubbornly high, adding uncertainty to the Federal Reserve's timeline for potential interest rate cuts.

Amid this backdrop, heightened market volatility is expected to fuel strong performance in the trading business, with Morgan Stanley poised to benefit from sustained client activity. Given its scale and market positioning, the company is well-equipped to capitalize on these fluctuations.

Moreover, Trump’s second term is likely to usher in a more business-friendly regulatory environment, particularly in deal-making. A rollback of stringent oversight could mark the end of the prolonged regulatory scrutiny that defined recent years. Coupled with a favorable interest rate landscape, steady economic growth and a robust deal pipeline, these conditions set the stage for a resurgence in investment banking (IB).

Morgan Stanley remains optimistic about its IB performance, supported by a strong and diversified merger and acquisition (M&A) pipeline. During the firm’s fourth-quarter earnings call, CEO Ted Pick remarked, “Depending on how you measure it—whether by volume, number of deals, or overall value—M&A pipelines are at their highest levels in seven years.” Similar optimism has been echoed by top executives at GS and JPM, signaling broad industry confidence in the deal-making landscape for 2025.

Other Key Factors at Play for Morgan Stanley

Revenue Diversification: Morgan Stanley has lowered its reliance on capital markets for income generation. The company’s focus on expanding its wealth and asset management operations and the strategic acquisitions, including Eaton Vance, E*Trade Financial and Shareworks, are steps in that direction. These moves have bolstered its diversification efforts, enhanced stability and created a more balanced revenue stream across market cycles. Both businesses’ aggregate contribution to net revenues jumped to more than 55% in 2024 from 26% in 2010.

Last year, Morgan Stanley recorded $82.5 billion of total net flows in the Investment Management division compared with just $7.5 billion in 2023. Hence, assets under management or supervision were $1.6 trillion as of Dec. 31, 2024, rising 14% year over year. Further, the Wealth Management division’s total client assets jumped 21% to $6.2 billion at 2024-end.

Strategic Alliance: Morgan Stanley’s partnership with Mitsubishi UFJ Financial Group, Inc. MUFG is expected to keep supporting profitability. In 2023, the companies announced plans to deepen their 15-year alliance by merging certain operations within their Japanese brokerage joint ventures. 

The new strategic alliance will see combined Japanese equity research, sales and execution services for institutional clients at Mitsubishi UFJ Morgan Stanley Securities and Morgan Stanley MUFG Securities. Also, their equity underwriting business has been rearranged between the two brokerage units. These efforts will solidify the company’s position in the lucrative Japanese market.

Fortress Balance Sheet: Morgan Stanley’s solid balance sheet position supports its enhanced capital distributions. Following the 2024 stress test results, the company announced an increase in its quarterly dividend by 8.8% to 92.5 cents per share. 

The company also reauthorized a new multi-year share repurchase program of up to $20 billion, effective the third quarter of 2024 and with no expiration date. As of Dec. 31, 2024, approximately $18.5 billion shares remained available under the authorization.

Bullish Analyst Sentiments for Morgan Stanley Earnings

Given the favorable operating environment, analysts are bullish about Morgan Stanley’s prospects. Over the past month, the Zacks Consensus Estimate for 2025 and 2026 earnings has moved upward. 

Estimate Revision Trend
 

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This upward adjustment reflects a positive sentiment among analysts and suggests encouraging prospects. 

Over the long term, the company’s earnings are expected to grow 13.3%. The Zacks Consensus Estimate for Morgan Stanley’s 2025 and 2026 earnings implies year-over-year growth of 7.7% and 10.2%, respectively. 

Earnings Estimates
 

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Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

Morgan Stanley Shares: A Bit Expensive

Given an impressive rally in MS shares, it appears slightly expensive relative to the industry. The stock is currently trading at the forward 12-month price/earnings (P/E) of 15.48X. This is above the industry’s 14.06X, reflecting a slightly stretched valuation.

MS Price-to-Earnings Ratio F12M
 

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Parting Thoughts on Morgan Stanley Stock

Morgan Stanley’s global presence, rebound in the IB business and efforts to focus on less volatile revenue streams provide a solid base for organic growth. The company’s balanced business model provides stability and growth potential, even during volatile markets.

Given its favorable prospects and resurgence in the capital markets, investors should consider buying Morgan Stanley stock. Those who already have it in their portfolio can consider holding on to it for robust returns.

Morgan Stanley currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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