By Andrew Welsch

Wealth management and brokerage stocks got hammered Friday morning as mounting economic and trade policy uncertainty threatens to cut short a boom in investor trading activity. Among the stocks hardest hit was Robinhood Markets, which fell 6.4%, and LPL Financial, which dropped 7.4%. At one point early Friday morning, shares of Robinhood and LPL were both down more than 9.5%.

U.S. stocks more broadly were also down sharply Friday morning after a weaker than expected jobs report added to investor concerns about slowing economic growth. The S&P 500 and the tech-heavy Nasdaq declined 1.48% and 1.87%, respectively in late-morning trading.

Financials were down more. The Vanguard Financials ETF, which tracks a broad basket of financial stocks, was down 2.06%. Shares of Charles Schwab, one of the nation's largest wealth management companies, were down 2.1%.

Frothy markets had lifted brokerage firms' earnings during the second quarter, a volatile period for markets. The quarter began with a sharp selloff in U.S. stocks because of President Donald Trump's tariff announcements and ended with a strong rally after the president delayed implementation of some of his tariffs. Investors rushed to buy stocks with their own money or on margin, meaning they borrowed from their brokerage firms. Margin debt hit a record $1 trillion in June. The trading frenzy also lifted profits generated by trading desks at the nation's largest investment banks, such as Goldman Sachs and Morgan Stanley.

But this week brought disappointing economic news and new tariff announcements. The monthly jobs report showed employers added just 73,000 jobs in June compared with an expected 115,000. The report also included sharp downward revisions to prior months, showing the economy has been adding few jobs, and some sectors, such as manufacturing, have shed employees. GDP has also grown at a much slower pace during the first six months of this year compared with the same period last year: 1.2% compared with a 2.5% average pace in 2024.

The worry for wealth management and brokerage firms is that the market's animal spirits could go into hibernation during an economic slowdown and investors could become hesitant to put more money in their brokerage accounts. Shares of Raymond James Financial, which has a large wealth management unit and an investment bank, fell 2.8% Friday morning. Shares of Ameriprise Financial and Stifel Financial declined 2.96% and 3.26%, respectively.

A weakening economy may also hurt other parts of the financial services sector, such as by postponing a long-hoped-for-turnaround in investment banking activity. Companies could decide to put off dealmaking until they have more certainty around economic and trade policy. Wealth management executives had been hoping to see an uptick in IPOs and dealmaking generally in 2025, which would create new wealth for financial advisors to manage.

Shares of Morgan Stanley, which operates large investment banking and wealth management businesses, were down 2.64% on Friday. Shares of JPMorgan Chase, Wells Fargo, and Bank of America were down 2.30%, 2.54%, and 3.06%, respectively. All three companies have large consumer banking, investment banking, and wealth management business units.

Friday's turmoil echoes similar days in April when tariff announcements sent markets into a tizzy. It remains to be seen whether investors treat this as another opportunity to buy the dip or a warning to sit this one out.

Write to Andrew Welsch at andrew.welsch@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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August 01, 2025 11:24 ET (15:24 GMT)

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