US Bank Results Signal Reopening for Private Equity and Consumer Resilience

June quarter earnings from the major US investment banks do more than mark a rebound in trading. They provide early signs of improving conditions for private equity dealmaking and sustained consumer strength. After two years of defensive posturing, these results point to the early stages of a more functional capital markets environment.

Trading and Advisory Rebound

Goldman Sachs led the way with a 36% year-on-year surge in equities trading revenue, reaching a record US$4.3 billion. Its investment banking fees rose 26%, driven by improved deal activity and market-sensitive flows. JPMorgan delivered a 7% increase in investment banking fees, while Citi, traditionally a weaker performer in this space, recorded a 13% uplift. Collectively, the five major Wall Street banks generated more than US$33 billion in trading revenue, up 17% from the prior year.

These numbers reflect more than opportunistic trading around volatility. They signal a return of institutional risk appetite. Executives across the banks referenced stronger client engagement, growing pipelines, and a reactivation of previously stalled mandates. Importantly, this rebound has not been built on directional bets or speculative positions. Instead, it reflects disciplined positioning, active risk management, and a focus on serving institutional clients, particularly sponsors and corporates.

Private Equity Re-engages

For private equity, the results offer tangible signs of reopening. Capital formation, particularly mid-market M&A, debt issuance, and early-stage IPO preparation, is picking up. Sponsors are back in the market, no longer relying solely on secondaries or extensions. With base rates stabilising and underwriting appetite returning, leveraged buyout financing is once again being discussed on earnings calls.

Banks highlighted a growing queue of companies preparing for public market listings, especially in healthcare and tech-adjacent sectors. This is particularly relevant for private equity, as successful IPOs help validate portfolio company valuations and support exit planning.

This is not a repeat of 2021. Underwriting remains conservative, leverage is lower, and public market investors are far more valuation-sensitive. But the operating environment is becoming more functional, enabling sponsors to consider new deployment, recapitalisations, and ultimately, exits.

Consumer Remains Resilient

Alongside investment banking strength, the results also pointed to continued stability in the US consumer. Across the retail-facing businesses of major banks, credit quality remains sound. Delinquencies are rising slowly but remain below pre-COVID levels. Deposit balances are holding up, and card spending data shows no sharp retrenchment.

This matters for both the macroeconomic outlook and for private equity portfolio companies exposed to discretionary spending. A stable consumer underpins top-line resilience and lowers the probability of widespread stress in operating performance or default activity. For now, the data is consistent with a soft-landing thesis: decelerating inflation, solid employment, and manageable credit conditions.

What to Watch Next

While Q2 earnings were strong, several forward indicators will determine whether this early momentum carries through or fades in the second half.

1. Deal Execution, Not Just Pipeline Growth

Many banks noted stronger pipelines across M&A and ECM. The next step is execution:

• Will boards follow through with approved transactions?
• Will the IPO backlog convert into actual listings?

Conversion will be the true signal that capital formation has resumed

2. Private Equity Deployment and Exits

Sponsors are more active, but watch for:

• A shift from private credit back to syndicated bank finance for new deals.
• Growth in sponsor-backed M&A and recap activity.
• Rising exit volumes, especially in sectors where valuations have rebased.

3. Consumer Credit Deterioration

The risk of overextension remains, particularly among lower-income borrowers. Banks’ provisioning trends, personal loan performance, and Q3 spending patterns will provide clues. A sharp deterioration here could undermine the current economic stability thesis.

4. Rate Path and Volatility

The direction of monetary policy remains critical. Any hawkish surprise from the Fed, especially at Jackson Hole or in upcoming CPI prints, could slow deal execution or dent valuations. Conversely, clarity on rate cuts could further unfreeze activity.

Outlook

Q2 earnings show Wall Street is not simply rebounding, it is repositioning. The investment banks delivering the best results are those with leaner operating models, tighter alignment across banking and markets, and a focus on institutional capital formation.

The implications are broader than just bank profitability. A functioning capital markets ecosystem is a prerequisite for private equity activity and underpins broader economic confidence. If these trends hold and convert into closed deals, successful IPOs, and stable consumer spending, the June quarter may be remembered not as a bounce, but as the start of a new phase.

By Joey Mouracadeh, Senior Investment Director

AI talent wars

The global technology landscape is currently gripped by an unprecedented talent war for top artificial intelligence (AI) researchers, with tech giants including Facebook owner Meta, ChatGPT’s OpenAI and DeepMind’s Google deploying vast resources and distinct strategies to secure the scarce human capital deemed essential for leading the next wave of AI innovation. This fierce competition reflects a profound shift in direction within the tech industry, where AI dominance is seen as existential. The stakes are immense, as the success of these initiatives could determine which companies lead the next technological revolution.

Astronomical compensation packages are now common, with offers reportedly reaching hundreds of millions of dollars for elite researchers. OpenAI CEO Sam Altman recently said Meta had lured away some key AI engineers with promises of $US100 million (A$152 million) sign-on bonuses which led to, Mark Chen, OpenAI’s chief research officer saying he felt “as if someone has broken into our home and stolen something”. Meta appears to have stepped up its push to poach top AI researchers after the launch of its latest AI model, Llama 4, underwhelmed critics and the model underperformed rivals on independent benchmark tests.

In addition to poaching individuals the tech giants are also using acquihiring, a hybrid of “acquisition” and “hiring,” as a tactic in the war for talent. This involving companies either acquiring a business or the business assets (i.e. key staff and intellectual property) primarily to get access to the founders and employees rather than products and revenues. This allows the purchaser to rapidly scale its own workforce and bypass traditional recruitment. A secondary, sophisticated motivation is avoiding antitrust scrutiny, as hiring of founders and key staff allow firms to sidestep regulatory hurdles that could come from buying a key competitor.

In March, Microsoft paid US$650 million to bring on the cofounders and dozens of staff from AI startup Inflection. In June, Amazon hired several cofounders and employees from Adept, another AI startup. Those deals are being reviewed by regulators, reflecting growing concern in both the US and Europe about how AI deals are put together by tech giants. The increased use of acquihiring is also impacting venture capital investors, who face risks that an AI startup’s founders and key staff are poached as a team in return for huge financial incentives leaving lower returns to equity investors who may be left with the residual staff and a business that may be less saleable.

Each tech giant employs a distinct strategy in this high-stakes contest:

Meta: Under Mark Zuckerberg’s direct leadership, Meta has emerged as the most aggressive player in the talent war, leveraging its immense capital to poach top researchers from rivals like OpenAI and Apple. Offers can reach up to US$300 million over four years, including US$100 million in the first year with immediate stock vesting. Beyond lavish pay, Meta lures AI researchers with unparalleled computational power, with plans to build massive clusters of Nvidia Graphics Processing Units (GPUs), offering researchers “infinite GPUs” and the autonomy to “build god”. This capital-intensive strategy is complemented by strategic investments, including the recent US$14.3 billion investment for a 49% stake in Scale AI, a startup which operates a global workforce of contractors across Kenya, the Philippines and Venezuela who manually label images, text and video used for AI model training.

OpenAI: Despite being a target of aggressive poaching, particularly from Meta, OpenAI largely counters with a focus on its unique mission and culture. CEO Sam Altman has famously characterized OpenAI employees as “missionaries” versus Meta’s “mercenaries,” emphasising its focus on AI’s holy grail, Artificial General Intelligence (AGI) or human-level cognitive abilities capable of understanding, learning, and applying knowledge across a wide range of tasks, like a human. OpenAI also offers its AI researchers a greater commitment to safety and ethical advancement. While offering substantial retention bonuses, its primary appeal lies in providing an environment where researchers believe their impact on AGI development can be greater.

Google: Google, a long-standing leader in AI research through its DeepMind division, employs a multi-pronged strategy that combines both defensive manoeuvres and strategic acquisitions. Controversially, Google has implemented “garden leave” and stringent non-compete agreements, paying top AI specialists to sit idle for up to a year when they resign, effectively preventing them from joining competitors. While criticised for being anticompetitive and stifling innovation, Google justifies these measures as necessary to protect its interests. Alongside these tactics, Google engages in acquihires, exemplified by its US$2.4 billion licensing deal with Windsurf for AI coding talent and a US$2 billion agreement for Character.AI’s co-founders.

Beyond the corporate rivalry, this talent scramble is reshaping the broader tech industry. Major tech companies are conducting large-scale layoffs of mid-level employees in other divisions to strategically redirect funds into AI investments which is viewed as an existential priority. Ethically, the concentration of AI power and talent in a few hands raises concerns about employee mobility, fair competition, and the potential stifling of diverse innovation. The outcome of this battle for minds will undoubtedly define the trajectory of AI development for decades to come.

By Nick Ryder, Chief Investment Officer

Fixing Australia’s Productivity Slump

Australia’s productivity growth has slowed to its weakest pace in 60 years. Labour productivity grew just 1.1% in the decade to 2020, and multifactor productivity (MFP) has remained largely flat, highlighting inefficiencies in how labour and capital are combined. While past prosperity rode on the back of reform in the 1980s and 1990s, today’s task is to chart a fresh path for growth.

A Stated Government Priority

Treasurer Jim Chalmers has declared productivity reform the centrepiece of the Albanese Government’s second-term economic agenda. Five Productivity Commission (PC) inquiries have been commissioned to examine structural reform across:

1. A more dynamic and resilient economy
2. A skilled, adaptable workforce
3. Data and digital technology
4. Quality care delivered efficiently
5. Cheaper, cleaner energy for net zero

These inquiries are due to report by December 2025, following interim reports mid-year and broad consultation through 2025.

The Productivity Pitch

In a first for the Productivity Commission, everyday Australians were invited to submit ideas to improve productivity across these five areas. Over 500 contributions were received, ranging from digital tools in education to care sector reform and energy approvals. The top 15 proposals are now being consulted on, with final recommendations feeding directly into national policy development.

This public process marks a deliberate shift: from closed-door expert review to inclusive, ground-level insight. It positions productivity as not just a Treasury issue, but a shared national concern. However, this approach also presents limitations. Crowdsourced ideas may vary significantly in quality, feasibility, and economic impact, and some critics argue that this raises a risk of favouring anecdotal solutions over those grounded in robust evidence or economic modelling.

The Growth Mindset Message

In a May 2025 address, Productivity Commission Chair Danielle Wood urged Australia to adopt a “growth mindset”, an active, forward-looking policy posture focused on innovation, diffusion of technology, and dynamic labour markets.

She highlighted that productivity inertia could cost Australians $14,000 per person in lost income over the next decade. The issue, she argued, is not lack of effort but a policy and cultural framework that is slow to adapt. This means productivity must be embedded across all portfolios of government, not siloed within Treasury.

Notably, she gave little emphasis to conventional levers such as tax cuts or deregulation, a decision that has frustrated many economists and commentators who continue to highlight inefficiencies in Australia’s current tax policy framework. Instead, her focus was on coordinated reform, improved regulatory settings, and sustained investment in education, digital infrastructure, and care services. While this broader, systems-oriented approach is commendable, its success hinges on effective implementation, an area where governments have historically struggled. Coordinated reform across sectors and jurisdictions is complex, often politically fraught, and slow to deliver measurable outcomes.

Emerging Reform Themes

From the Productivity Pitch and PC’s consultation papers, several reform priorities are taking shape:

• Streamlined regulation, especially in the care and clean energy sectors
• Incentives for business investment and innovation
• Modernised education and vocational pathways
• Improved digital access and consumer data rights
• Early-intervention models in aged and disability care

The case for action is urgent. Weak productivity limits wage growth, public revenue, and long-term economic resilience. It also risks exacerbating inequality, especially as capital becomes more productive than labour in the digital economy.

Modest, well-targeted productivity gains compound over time. Even 0.3% faster productivity growth would materially improve real wages and reduce fiscal pressures. Yet the challenge lies in translating high-level proposals into implementable reforms with measurable outcomes. Without clear metrics, accountability, and bipartisan support, many reforms risk stalling or underdelivering.

Where to Next?

• Public submissions on the reform ideas closed in June 2025.
• Interim reports are expected in the immediate weeks ahead.
• Final recommendations will inform the 2025–26 Budget cycle.

Fixing Australia’s productivity problem is no longer optional. It is the foundation for future prosperity, fairness, and fiscal sustainability. With the Productivity Pitch drawing on the ideas of everyday Australians, and the Commission’s growth mindset framing the national conversation, the stage is set.

But the window is narrow. What matters now is delivery. Productivity is everyone’s business, and this Government has made it clear that it’s now its top priority. Whether this well-intentioned strategy can overcome execution risk and deliver real economic uplift remains the key question.

By Vincent O’Neill, CEO

Source: Macro Business

RBA Minutes

The Reserve Bank of Australia (RBA) surprised economists and markets in July, opting to keep interest rates on hold at 3.85% against widespread expectations for a rate cut. This surprise decision triggered discomfort and criticism for Governor Michele Bullock, who faced claims of ineffective communication regarding the RBA’s “shock” decision. By a 6-3 majority, the RBA Board chose a path of caution, emphasising a “wait and see” approach for incoming data before adjusting policy again.

This week we received the Minutes from the RBA’s July meeting which highlighted the Board’s commitment to a “cautious and gradual strategy” for monetary easing. A key factor in holding rates steady in July was the view that three rate cuts within four meetings would not align with this Board’s gradual approach. The Board sought to “wait a little longer for further confirmation of the economy’s trajectory”, specifically awaiting the June quarter Consumer Price Index (CPI) and the June labour market report.

The RBA assessed its monetary policy as “still modestly restrictive”, acknowledging the difficulty in precisely determining where the “neutral” cash rate in Australia lies. While all members agreed that underlying inflation was expected to decline further, “warranting some additional reduction in interest rates over time,” the focus at the July meeting was on the “appropriate timing and extent of further easing, not the direction”. The emphasis on “timing” strongly implied that interest rates were “probably still coming down”.

Several considerations supported the majority’s decision to hold. Monthly inflation indicators for April and May were perceived as “marginally higher” than consistent with RBA staff inflation forecasts, and growth in private demand in the March quarter had been “a little stronger than expected”. Conditions in the labour market “had not eased as anticipated,” even though subsequent to the meeting we learned that June’s unemployment rate rose more than expected. Furthermore, the reduced likelihood of the most severe global downside scenarios meant the Board could place more weight on its baseline forecasts and less weight on a more drastic trade war-induced slowdown. Concerns over persistently weak productivity growth, suggesting that subdued GDP growth might not be far below the economy’s supply capacity, also played a role in the rate decision.

Contrasting the view of the majority of the RBA Board, the newly released vote details showed a minority of three Board members advocated for an immediate cut, arguing there was “already sufficient evidence” that inflation was sustainably returning to the midpoint of the target range, “if not lower”. They cited the significant lags in monetary policy’s effect on the economy, subdued GDP growth, and signs of a loss of momentum in activity, suggesting risks that inflation could undershoot projections.

Looking ahead, despite the July rate hold, the Minutes firmly indicate that the RBA Board has an easing bias. The unanimous agreement among all members that the “outlook was for underlying inflation to decline further…warranting some additional reduction in interest rates over time” is seen by some as soft “forward guidance” for future cuts. The unemployment rate rise from 4.1% to 4.3% in June has reinforced market expectations, making an August rate cut a near certainty. Economists at NAB forecast a rate cut in August and then again in November and February, bringing the cash rate to 3.1%, while CBA anticipates August and November cuts, with a possibility of an early 2026 reduction.

The RBA’s July pause was a deliberate move to confirm the economic trajectory through additional data, rather than a signal against future easing. In this regard the upcoming June quarter CPI data, due on July 30^th, is considered critical for the RBA’s August decision. The stage is set for an August cut, with subsequent moves contingent on incoming data and the Board’s continued cautious calibration of monetary policy.

By Nick Ryder, Chief Investment Officer

Emerging Markets, Developed Markets, or Both?

Emerging markets are once again attracting investor attention, off the back of global trade wars and a depreciating US dollar, which have been spurred on by US tariffs. This has led many investors to begin questioning the notion of US economic exceptionalism and whether now is the time to be diversifying their country exposures.

For the vast majority of emerging market economies, tariffs may prove to be a challenge. This uncertainty, combined with easing global inflation (in most countries), is often the perfect recipe for central banks to take a dovish stance. Policy easing in the short and medium term could help strengthen emerging market local currency bonds relative to US dollar bonds. It could also help revitalise private and public sector investment, which could drive emerging market equity prices higher.

However, it is important to remember that emerging markets economies are not homogeneous. While many countries are experiencing improved macroeconomic stability, there are others that face continued uncertainty. For instance, Brazil has shown encouraging budget and inflation progress, while Colombia has seen suspended lines of credit from the International Monetary Fund due to fiscal uncertainty. Meanwhile, China, is pivoting towards policy stability and domestic reform amid shifting global trade relationships and has shown a willingness to inject cash into its domestic economy to help stimulate spending.

Delving beyond the macroeconomic environment, there is also wide dispersion in the governance and regulatory frameworks of many emerging market countries. Investors need to remain extremely cognisant of these risks as they can change very quickly, leaving investors stranded with assets that could potentially become worthless (i.e. Russian assets as a result of Russia’s invasion of Ukraine). From an investor’s point of view this emphasises the importance of active investing in emerging markets, giving portfolio managers the ability to identify countries with favourable regulatory and economic environments and invest accordingly. This is quite a prudent approach as opposed to investing passively, via exchange-traded funds, and being forced into holding exposures in certain countries simply because they form part of the emerging market index.

Despite the outperformance from emerging markets relative to developed markets this year, it is important to reiterate that the concept of US economic exceptionalism is well and truly alive. US equity markets are now trading back at all-time highs a mere two months after almost entering bear market territory. Underweighting a market such as the US, which has a history of innovating and outperforming the rest of the world could be a major drag on investor returns. Instead of choosing between developed and emerging markets, an effective approach that has been advocated in client portfolios is to invest with global equity managers, who have the ability to allocate capital to both developed and emerging markets, allowing them to take advantage of attractive opportunities wherever they present themselves.

By Joseph Nakhoul, Investment Research Analyst

Jay Powell’s New Normal: A Fed Chair Under Fire

Federal Reserve Chair Jerome (Jay) Powell is facing what many are calling his ‘new normal’, a political storm focused on tariffs, interest rate policy, and the escalating cost of the Federal Reserve’s headquarters renovation (estimated between $2.5 and $3 billion).

Overnight (24 July), the Trump administration stepped up its pressure with an unusual visit to the Fed building, questioning the project’s growing price tag. Former President Trump claimed the cost had ballooned to $3.1 billion. Powell corrected the record, clarifying that the figure included a separate structure completed five years earlier. While Trump later said he had no immediate intention to dismiss Powell, his Budget Director Russ Vought and other allies are using the renovation cost as a potential reason to remove him “for cause”.

At the same time, Powell is resisting renewed pressure to cut interest rates quickly. Trump has publicly called for deep rate cuts, but Powell has warned that tariffs are likely to increase inflation while also slowing growth. This presents a difficult challenge for monetary policy, as the Federal Reserve seeks to manage inflation without derailing economic momentum.

During testimony to Congress in late June, Powell strongly defended the central bank’s independence, stating that the Fed would continue to make decisions “strictly without consideration of political or any other extraneous factors”. Financial conditions in the US have eased markedly, supported by buoyant equity markets, a weaker US dollar, and strong household liquidity. Together, these factors make the case for aggressive rate cuts more challenging, despite growing political pressure. Legally, a Federal Reserve Chair cannot be removed without cause, a safeguard intended to protect the institution’s independence. Both moderate and conservative members of Congress have cautioned that any attempt to remove Powell could damage confidence in US financial leadership and market stability.

Some economists, including Mohamed El-Erian, have suggested Powell could eventually step aside voluntarily as a way to protect the institution’s independence and credibility, particularly if political interference begins to erode public trust in the Federal Reserve’s ability to act objectively if the political pressure becomes too disruptive to the Fed’s mission. While Powell has shown no signs of stepping down, the mere suggestion underscores the seriousness of the current climate.

Powell remains committed to data-driven decision making. However, with rising tensions from both the White House and Capitol Hill, his ability to steer policy and preserve the Fed’s independence is being tested more than ever.

By Vincent O’Neill, CEO

Source: The Wall Street Journal

Latest Podcast

SB Talks: RBA Surprise, Shifting Tariff Deadlines & US$4 trillion Megacorp

In this episode of SB Talks, Stanford Brown CEO Vincent O’Neill speaks with Chief Investment Officer Nick Ryder.

They discuss:

• RBA Rate Moves – Direction or Timing?
• July 9th US Tariff Deadline Passes, Now What?
• NVIDIA Breaks Records, Again

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