A Rough Summer for the Investment Banks. Given the weaker than expected July and August business trends for the major investment banks, we reduce our earnings outlook for Goldman Sachs and Morgan Stanley. While we were anticipating a typical summer slowdown for activity levels, what we did not fully factor in was the toll taken from heightened macro concerns surrounding the recent U.S. debt downgrade, sovereign credit concerns in peripheral Europe and fears of a double-dip recession, which were much greater than we'd anticipated. We lower our estimates to account for the recentmarket correction for risky asset prices and weaker client activity levels (a function of muted client risk appetite and lessprimary market activity)-expect these headwinds to weigh most heavily on principal investment, underwriting and fixed income sales and trading results; we anticipate equities and FX business performance to be relative bright spots. As always, we see September as a critical month for activity/business performance and gauging client confidence levels heading towards year-end.
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