01:24 PM EDT, 03/19/2025 (MT Newswires) -- An expected rebound in merger and acquisition activity this year will be either delayed or cancelled amid heightened uncertainties around tariffs and the fiscal cleanse targeted at the federal government, Oppenheimer said Wednesday.

The brokerage was optimistic about M&A bouncing back this year given factors including pent-up demand, stable or declining interest rates and strong stock market valuations. But there's been no real sign of a rebound year to date, with M&A activity up just 2.4%, analysts Chris Kotowski and Kevin Tripp said.

"Moreover, we fear that the current uncertainty over tariffs, a fiscal 'detox' and the general upheaval of 80 years of trade and security arrangements is likely to cause a pause in M&A activity," they said.

Markets have been volatile in recent weeks amid US President Donald Trump's tariff plans. Separately, the Department of Government Efficiency, created by Trump and being led by Elon Musk, is pushing to pare down the federal government workforce as part of efforts to cut federal spending.

The brokerage now assumes investment banking revenues to be flat year over year through the remaining three quarters of 2025.

Oppenheimer downgraded investment banks Goldman Sachs ( GS ) and Jefferies Financial Group ( JEF ) to perform from outperform and trimmed estimates to reflect muted first-quarter revenue projections by Dealogic.

The brokerage downgraded Carlyle Group ( CG ) to perform. "It is most dependent on having to return significant amounts of capital to (limited partners) in order to facilitate the next generation of flagship (private equity) funds," Kotowski and Kevin Tripp said.

Shares of Carlyle gained 2.4% in afternoon trade, while Jefferies' climbed 1.3%. Goldman Sachs ( GS ) rose 0.3% as the benchmark equity indexes rebounded ahead of a Federal Reserve monetary policy decision.

The analysts said Carlyle has a number of matured investments that are ready to be monetized, but this will likely be "more challenging" than previously expected.

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