Banking Giants Set for Potential Rally as Deal Activity Rebounds in 2026

Capital Markets Show Strong Signs of Recovery

The investment banking sector is experiencing a notable turnaround after years of volatility. What’s driving this shift? The answer lies in three converging factors: moderating interest rates, stabilizing macroeconomic conditions, and renewed corporate confidence.

For much of the past five years, investment banking faced significant headwinds. The aggressive interest rate hiking cycle that peaked recently made deal financing expensive and weighed heavily on equity valuations. The period from 2022 to 2024 saw companies largely sideline M&A and IPO activity as they waited for clearer economic conditions. The impact was particularly severe for full-service investment banks like Goldman Sachs and Morgan Stanley.

However, the landscape is shifting. With inflation cooling and interest rates plateauing, companies are cautiously reentering the market. Large corporations are leading the way, signaling broader economic optimism heading into next year.

M&A Volume Surging and IPO Pipeline Strengthening

Recent data paints a compelling picture of dealmaking momentum. According to professional services analysis, merger and acquisition volume has climbed approximately 8% on a year-over-year basis. More impressively, the total value of M&A deals has skyrocketed 146%, indicating that mega-deals are driving significant growth.

This surge is being fueled by strategic divestitures and substantial corporate investments in artificial intelligence infrastructure. Looking ahead to 2026, forecasts suggest continued acceleration due to improving corporate balance sheets and heightened M&A appetite.

The IPO market is equally robust. Through the third quarter, this year’s IPO activity already matched the full-year 2024 totals in both deal count and proceeds raised. The third quarter alone saw 65 IPOs raise $15.7 billion, compared to just 40 IPOs generating $8.6 billion in the same period last year. Notable offerings from companies like Figma, CoreWeave, Circle Internet Group, and Chime Financial demonstrate market demand for quality issuers. Looking further ahead, highly anticipated listings including SpaceX—potentially valued above $1.5 trillion—could accelerate IPO market activity substantially.

Three Investment Banks Positioned to Benefit

JPMorgan Chase remains America’s dominant player in investment banking. As the nation’s largest bank by assets, it consistently ranks at the top of global investment banking fee revenue. Its substantial balance sheet and capital cushion enable it to lead on complex, high-value M&A transactions and leveraged buyouts that smaller competitors cannot match.

Goldman Sachs operates as a pure-play investment bank with unmatched expertise in M&A advisory. It consistently claims the No. 1 global position in total M&A deal value and has already seen a sharp uptick in mega-deal activity this year. Its specialized positioning and premium brand make it a natural beneficiary of dealmaking expansion.

Morgan Stanley brings particular strength in public offerings and has established itself as the go-to advisor for technology and healthcare sector IPOs. Its track record in guiding emerging companies through public markets, combined with strong performance this year as these high-growth sectors lead the recovery, positions it favorably for continued gains.

The Path Forward for 2026

After an extended period of subdued activity, the investment banking industry is entering a new phase. The convergence of supportive macroeconomic conditions, pent-up deal pipelines, and renewed corporate appetite for strategic activity suggests that 2026 could be notably stronger than recent years. For investors tracking the financial sector, the strategic positioning of these three banking powerhouses around dealmaking expansion warrants close attention.