Bank stocks plunged again in premarket trading on Friday. Deutsche Bank and Mitsubishi UFJ fell 7%; Banco Santander, ING Groep, HSBC, and Barclays fell 5%; UBS fell 3%; Goldman Sachs, Morgan Stanley, and JPMorgan Chase fell 1%; Wells Fargo, Bank of America, and Citigroup fell mearly 1%.

Bank and brokerage stocks fell sharply Thursday as investors weighed a gloomy outlook and the economic ramifications of President Donald Trump’s far-reaching tariffs.

The KBW Nasdaq Bank Index ended the day down 9.9%. Shares of the nation’s largest consumer banks were among those hardest hit. Bank of America’s stock plunged 11%. Shares of Wells Fargo and JPMorgan Chase were down 9% and 7%, respectively.

Trump’s new tariffs were higher than many on Wall Street expected, and they have exacerbated ongoing investor worries about weak economic growth, even a possible recession. Although banks aren’t directly affected by tariffs, the businesses and customers they serve are being hit with higher costs. A resulting economic slowdown or recession could reduce demand for loans and increase delinquencies, hurting banks’ profitability. 

“Tariffs have inflamed fears of a potential recession that would likely lead to reduced loan demand and more delinquencies,” says Gene Goldman, chief investment officer of wealth manager Cetera Financial Group.

A weaker economy, which many investors had already been factoring in before Trump’s bombshell tariff announcement, may hurt merger and acquisition activity as businesses cut back on investments in the face of uncertainty on trade policy. “Given the significant fees from these activities that banks derive, this can also impact profits,” Goldman says.

Shares of Morgan Stanley, which operates large investment bank and wealth-management businesses, dropped 9.5%. Rival Goldman Sachs Group fell 9.2%. Shares of investment bank and wealth manager Stifel Financial were down 10.9%.

Brokerage and wealth-management firms could also take a hit from tariff-related economic weakness. Falling equity markets may mean diminished revenue generated from fees on assets under management. And less stock trading could hurt firms that rely on payment for order flow as part of their revenue.

Shares of Robinhood Markets and Interactive Brokers Group dropped 10.4% and 8.5%, respectively.

Analysts at BofA Securities wrote in a Wednesday note that if the equity market correction deepens, there is a risk to brokerage firms’ earnings from diminished trading, less use of margin loans, and lower fees on assets under management. “After a strong finish to 2024, the escalating trade war and federal spending cuts have increased the risk of stagflation,” the analysts wrote, referring to the possibility of high inflation and low economic growth. 

An economic downturn may also lead clients to refrain from putting more money into their accounts. Shares of Charles Schwab, one of the nation’s largest wealth-management companies, fell 4.7%. Analysts have been closely monitoring Schwab’sability to bring in new client moneythis year as a sign that it can keep growing.

Shares of Raymond James Financial and Ameriprise Financial, two large wealth-management companies with thousands of financial advisors, fell 8.2% and 7.8%, respectively.

Shares of regional banks also tumbled Thursday. The SPDR S&P Regional Banking exchange-traded fund fell 10.3%. Shares of Birmingham, Ala.-based Regions Financial were down 11%. Columbus, Ohio-based Huntington Bancshares dropped 11.5%.

BofA Securities analysts wrote Thursday morning that they see risk to growth outlooks for regional banks because of weaker consumer activity. Company guidance on loan growth will likely be challenged but it’s too soon in the year to “to expect management teams to throw in the towel,” the analysts wrote. “Not a single bank we caught up with has flagged any signs of credit cracks. Credit more likely a 2H25 issue if the U.S. economy continues its downward trajectory.”

The gloomy outlook for financial stocks is a reversal of more hopeful expectations at the beginning of the year, when investors were focused on the potential benefits from Trump’s deregulatory agenda. Now, focus has shifted toward a potential weakening of consumer spending and credit. And a weaker economy can more than offset any benefits gained through deregulation.

“Think about it this way: You are unlocking excess capital, but if the economy is weak, companies may not be expanding and then there isn’t a demand for capital,” says UBS analyst Erika Najarian.

Malcolm Polley, chief market strategist at wealth-management company Stratos Investment Management, says banks are in better shape today than they were before the 2008 financial crisis, but a weaker economy and economic uncertainty would weigh on them. “It wouldn’t surprise me if we get a little bit of a bounceback,” he says. “But I think it will be a bit of a mess until we have better insight into the business environment.”