Bank of America Predicts a Bullish 2025 for U.S. Brokerage and Asset Management Sectors

Bank of America has issued a highly optimistic outlook for the U.S. brokerage, asset management, and exchange sectors in 2025, raising price targets by an average of 14%. This bullish prediction is fueled by a confluence of factors, including anticipated deregulation under a potential Republican presidency, a surge in retail investor participation, and robust U.S. GDP growth projected between 2% and 2.5%. Analyst Craig Siegenthaler described 2025 as the year of “extensions” of current positive market trends, further amplified by a potential “red wave” in the 2024 elections and subsequent policy changes. This positive outlook extends to the crypto and alternative investments (Alts) market, anticipating increased opportunities for brokers and asset managers.

Key Takeaways: Bank of America’s 2025 Market Predictions

• Significant Price Target Increases: Bank of America boosted price targets across the brokerage, asset management, and exchange sectors by an average of 14%.
• Deregulation Boost: A potential Republican presidency and subsequent deregulation efforts are expected to significantly benefit the sector.
• Retail Investor Engagement: Continued robust retail investor participation is a key driver of the positive outlook.
• Strong GDP Growth: Projected U.S. GDP growth of 2%–2.5% provides a favorable macroeconomic environment.
• Top Picks Revealed: Bank of America highlighted top “Buy” rated stocks, including Blue Owl Capital (OWL), Interactive Brokers (IBKR), and Tradeweb Markets (TW), while identifying Charles Schwab (SCHW) and Carlyle Group (CG) as “Underperformers”.
• Alternative Investments Surge: The report anticipates a strong year for alternative asset managers (Alts), with Blue Owl Capital emerging as a standout.

Blue Owl Capital: A Standout Performer in Alternative Investments

Bank of America’s report singles out Blue Owl Capital (OWL) as its top pick among alternative asset managers. The firm assigns a “Buy” rating with a price target of $33, projecting a remarkable four-fold increase in earnings per share (EPS) by 2027. This bullish outlook stems from several key factors:

Valuation and Earnings Quality

Blue Owl currently trades at a seemingly modest 16x its projected 2027 EPS, offering an attractive 4% dividend yield. What truly sets Blue Owl apart is the exceptional quality of its earnings. An impressive 100% of its EPS is derived from Fee-Related Earnings (FRE), and almost all its assets under management (AUM) are secured through either permanent or long-term capital commitments. This indicates consistent and predictable revenue streams, minimizing earnings volatility.

Secular Growth Drivers

Several long-term trends further enhance Blue Owl’s growth prospects. Increased retail access to alternative investments through Registered Investment Advisors (RIAs), strategic insurance partnerships, and ongoing consolidation among general partners are all expected to contribute to its sustained growth.

Analyst Craig Siegenthaler aptly summarized Blue Owl’s investment appeal as “under-owned, undervalued, and underappreciated,” highlighting its potential for significant future returns.

Interactive Brokers: A Tech-Driven Brokerage Giant

Interactive Brokers (IBKR) receives Bank of America’s top ranking among brokerages for 2025. The bank believes that the “Goldilocks” economic environment, characterized by solid GDP growth (2.0%-2.5%) and persistent inflation (above 2.5%), is particularly favorable for brokerage firms. Interactive Brokers‘ strengths extend beyond favorable macroeconomic conditions.

Strong Fundamentals and Competitive Advantage

The firm boasts an exceptionally high operating margin exceeding 70%, with incremental margins surpassing 80%. This demonstrates exceptional efficiency and profitability. Furthermore, Interactive Brokers holds a substantial $7 billion in excess capital, providing ample resources for reinvestment in growth initiatives. Its tech-first approach, including significant investments in research and development (R&D), and innovative trading tools like its Global Trader app, has fueled impressive account growth – 20% to 40% annually.

Valuation and Growth Potential

Despite its impressive performance, Bank of America considers Interactive Brokers undervalued, citing factors such as its float, voting rights/control structures and its capital retention policies. The firm’s continued innovation and technological edge position it for continued market share gains and robust growth in the coming years.

Bank of America also expressed optimism for Robinhood Markets (HOOD), believing it to be “best-positioned given high tech/low legacy cost models with strong innovation track records.”

Tradeweb Markets: Leading the Way in Electronic Trading

In the exchange sector, Tradeweb Markets (TW) emerges as Bank of America’s top choice. Its broad product offering, pioneering innovation, and strong long-term visibility are key reasons for this bullish assessment.

Competitive Advantages and Innovation

Tradeweb Markets’ extensive product portfolio, encompassing fixed income, ETFs, and money markets, ensures a broad appeal across multiple client segments including market makers, financial advisors, and corporate treasurers. Furthermore, the firm’s innovative portfolio trading and session trading protocols have driven substantial market share gains. These technological advancements provide a significant competitive advantage.

Long-Term Growth and Secular Trends

The ongoing shift from traditional voice-based bond trading to electronic platforms presents a major secular growth opportunity for Tradeweb Markets. This long-term trend suggests a sustainable growth trajectory for the foreseeable future, reinforcing its position as a leading exchange.

Bank of America’s report provides a compelling case for the strong growth potential within the U.S. brokerage, asset management, and exchange sectors in 2025. While acknowledging potential risks, the firm’s bullish outlook is supported by a combination of macroeconomic factors, industry-specific trends, and the unique strengths of the companies highlighted in the report. The identification of specific stocks, supported by detailed fundamental analysis, provides investors with actionable insights into this promising market segment.