Morgan Stanley vs Goldman Who Will Win the Top Spot?

In Wall Street's fast-paced, dog-eat-dog world, two names have consistently battled for supremacy in U.S. stock trading: Morgan Stanley and Goldman Sachs. Like heavyweight champions trading blows, these titans have long dominated the equity trading ring, each striving to outdo the other. But in recent years, Morgan Stanley, once the undisputed leader, took a heavy hit following the infamous collapse of Archegos Capital Management in 2021. Now, under the determined leadership of CEO Ted Pick, Morgan Stanley is fighting tooth and nail to reclaim its lost crown from Goldman Sachs. So, what’s at stake, and who’s got the upper hand in this cutthroat contest? 

The Archegos Capital Debacle 

Remember the old saying, “Don’t put all your eggs in one basket”? Well, Archegos Capital Management did just that, and the results were catastrophic. Back in March 2021, Archegos, run by Bill Hwang, built highly leveraged positions in a handful of stocks using financial wizardry known as total return swaps. Essentially, Archegos borrowed billions from big banks, including Morgan Stanley, while keeping its massive exposure under wraps. But when those stock values tanked, Archegos couldn’t cover its losses, and Morgan Stanley, along with other major players, was left holding the bag. 

The fallout was swift and brutal. Morgan Stanley reported losses of $644 million from selling off Archegos-linked stocks, plus another $267 million managing the mess, bringing its total hit to nearly $1 billion. Talk about a bad day at the office! The debacle laid bare critical flaws in Morgan Stanley’s risk management practices, exposing the risks of dealing with clients playing fast and loose with leverage. Even the best of the best can get caught with their pants down when proper controls aren’t in place. 

Betting Big on a Comeback 

So, what is Ted Pick’s Game Plan? Morgan Stanley’s new CEO, who stepped up to the plate in early 2023 with a clear mission: reclaim Morgan Stanley’s spot at the top of the equity trading heap. With years of experience in the firm’s equities business, Pick knew the ropes—and the risks—better than most. His strategy? Strengthen client relationships, expand market share, and double down on the bank’s prime brokerage division, the very unit hit hardest by Archegos. 

Pick’s playbook included aggressively extending credit to quantitative hedge funds like AQR and Two Sigma, which rely on complex algorithms and lightning-fast trades to generate big bucks. And the gamble seems to be paying off. Morgan Stanley’s latest earnings report showed a nearly 20% jump in equities trading revenue compared to the previous year, outpacing analysts’ expectations and closing the revenue gap with Goldman Sachs to its narrowest margin since 2022. Not too shabby for a firm that was licking its wounds just a couple of years ago. 

Meanwhile, Goldman Sachs, ever the savvy competitor, has maintained its lead, reporting a more modest 7% increase in equity trading revenue over the same period. While Morgan Stanley’s resurgence is a welcome comeback story, the road ahead is anything but easy. 

Morgan Stanley vs. Goldman Sachs: The Royale Battle 

Goldman Sachs may have dodged the Archegos bullet, but the bank didn’t rest on its laurels. Since the 2022 market shakeup, Goldman has ridden the wave of increased trading volumes and market volatility, posting $29 billion in equities trading revenue, outpacing Morgan Stanley by a cool $2.4 billion. That’s not just pocket change—it’s a testament to Goldman’s agile risk management and ability to capitalize on every twist and turn in the market. 

But Morgan Stanley isn’t just duking it out with Goldman. The competitive landscape is heating up as European heavyweights like Barclays and BNP Paribas eye a bigger slice of the U.S. equities market. Though their trading volumes still lag behind those of the American giants, their aggressive expansion strategies are putting the pressure on. It’s like watching an underdog team storm the playoffs—only this time, the stakes are measured in billions. 

Lessons Learned and the Path Forward 

Morgan Stanley’s response to the Archegos fiasco wasn’t just about damage control; it was a wake-up call that sparked a full-scale overhaul of its risk management protocols. The firm tightened controls, re-evaluated client relationships, and implemented tougher stress tests to ensure it wouldn’t get blindsided again. In a market where the only constant is change, adaptability is key—and Morgan Stanley seems determined to show that it’s learned its lesson. 

As Ted Pick pushes forward with his strategic vision, Morgan Stanley’s renewed focus on client acquisition and innovation could keep the bank on an upward trajectory. But don’t count Goldman Sachs out just yet. With both firms constantly evolving their playbooks, the battle for dominance is far from over. 

For now, Morgan Stanley’s comeback is a classic tale of resilience. It’s the financial equivalent of getting knocked down, dusting off, and stepping back into the ring. But with technological shifts, regulatory hurdles, and global competition all in the mix, the future of stock trading on Wall Street will be anything but predictable. 

So, who will reign supreme in the world of U.S. equities trading? Will Morgan Stanley’s aggressive tactics and new leadership propel it past Goldman Sachs? Or will Goldman continue to flex its financial muscle and fend off its long-time rival? Only time will tell, but one thing’s for sure: the race for the top spot is just getting started, and there’s no room for second place in this high-stakes showdown. Stay tuned, folks—this is one Wall Street saga you won’t want to miss. Subscribe to our weekly newsletter to get all such interesting stories in your inbox.