Summary of Morgan Stanley Investor Pulse Survey Q3 2025 Industry Overview - The survey focuses on the sentiment of self-directed retail investors in the US equity market for Q3 2025, indicating a shift towards bullishness compared to previous quarters. Key Findings Investor Sentiment - 62% of investors are now bullish on US equities, a significant increase from 49% in Q2 2025, marking the highest level since the survey began in Q1 2023 [3][10][16] - 66% of respondents believe the market will rise by the end of Q3 2025, up 17 percentage points from Q2 [10][12] - The bearish sentiment decreased by 13 percentage points, with only 22% expecting a market decline [10][11] Economic Outlook - A solid majority of retail investors now view the economy as expanding, a notable shift from the recession outlook in Q2 [2][10] - 64% of investors expect volatility to increase in Q3, but this is a decrease from 71% in Q2 [11][19] Portfolio Strategy - Fewer investors plan to change their portfolio allocations, with 41% indicating no changes, an increase from 37% in Q2 [24][28] - The technology sector remains the top investment choice, with 57% of investors favoring it, up 9% from the previous quarter [30][31] - Energy is the second most preferred sector, with 43% of investors showing interest, an increase from 41% [30][31] Risk Tolerance - The share of investors displaying higher risk tolerance rose to 44%, while those who are risk-averse fell to 17% [54][55] - 57% of investors are increasing the time spent managing their portfolios, up from 55% in Q2 [54][57] Asset Class Preferences - Interest in large and mid-cap US companies increased, with 58% and 50% of investors respectively showing interest, both up from the previous quarter [37][39] - Interest in fixed income investments has cooled, with recommendations for bonds falling from 39% to 34% [38][46] Online Trading Platforms - Investor sentiment varies significantly across online trading platforms. 81% of Robinhood users expect markets to rise, compared to 77% at Schwab and 66% among the broader population [6][61][62] - Robinhood's user base is younger and more active, with 78% identifying as active investors, while only 57% of Schwab investors do [61][66] Additional Insights - Inflation remains the top concern for investors at 39%, followed by tariffs at 33% and market volatility at 24% [23][25] - North America is perceived as the region with the highest investment potential, with 72% of investors favoring it, an increase of 9% from Q2 [31][34] This summary encapsulates the key insights from the Morgan Stanley Investor Pulse Survey for Q3 2025, highlighting a notable shift in investor sentiment towards optimism and increased engagement in the equity market.

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Investment Rating - The report maintains a Neutral rating on StepStone Group (STEP) and raises the 12-month target price to $63 from $57, indicating a potential upside of 6.2% from the current price of $59.30 [6][8]. Core Insights - STEP reported FY4Q25 EPS of $0.68, significantly up from $0.44 in FY3Q25, driven by record Fee-Related Earnings (FRE) of $94 million and strong net performance fee contributions of $42 million [1]. - The management fee revenue benefited from $15.7 million of retroactive fees, contributing to a healthy FRE margin of 44% for the quarter, with expectations for a normalized FRE margin of approximately 37% for FY26 [1][4]. - Fee-earning Assets Under Management (AUM) increased to $121 billion, reflecting a 6% quarter-over-quarter growth, supported by record private wealth subscriptions of $1.2 billion and $9.9 billion in gross inflows [1][4]. - The report anticipates continued management fee growth in the high teens, driven by strong fundraising momentum across various strategies and a doubling of Wealth AUM year-over-year to $8.2 billion [1][4]. - The report revises EPS estimates for calendar years 2025, 2026, and 2027 to $2.18, $2.35, and $2.74 respectively, reflecting improved visibility on AUM growth and a favorable FRE mix shift [1][5]. Summary by Sections Financial Performance - STEP's FRE margin for FY4Q25 was reported at 44%, benefiting from retroactive and non-recurring advisory fees, with a normalized FRE margin expected to be around 37% for FY26 [4]. - The company completed its second tranche of Non-Controlling Interest (NCI) buy-in, issuing $161 million in equity, which is expected to be modestly accretive to EPS [4]. Wealth Management - The Wealth business achieved record subscriptions of $1.2 billion, with AUM reaching $8.2 billion, up from $6.3 billion in the previous quarter and $3.4 billion year-over-year [1][4]. - STEP's evergreen suite is now available on nearly 500 platforms, with a distribution strategy focused on Europe [1][4]. Valuation Metrics - The SOTP analysis indicates a target price of $63, with a breakdown showing 78% of value derived from FRE, 19% from carry, and 2% from balance sheet value [5][6]. - The current valuation of STEP is approximately 27 times the 2025 estimated adjusted diluted earnings, aligning with the three-year average NTM P/DE of 27-28 times [1].

Financial Data and Key Metrics Changes - Stifel Financial generated approximately $1.3 billion in net revenue during Q1 2025, marking the highest first-quarter revenue and the third strongest quarter overall, driven by record asset management revenue and robust advisory and transactional revenue [4][10] - Operating EPS was $1.65, an 11% increase year-over-year, representing record first-quarter earnings per share, although the bottom line was impacted by a significant legal charge of $180 million [4][12] - Net revenue for the quarter was $1.26 billion, an 8% increase year-over-year, reflecting strength in both Global Wealth and institutional groups [10][11] Business Line Data and Key Metrics Changes - Global Wealth Management revenue reached $851 million with a pretax margin of 36%, driven by record asset management revenue and strong transactional revenue [20] - Investment banking revenues rose 11%, driven by increases in both capital raising and advisory, with advisory revenue increasing by 15% year-over-year [11][25] - Asset management revenue was up 11% year-over-year, reflecting organic growth and market appreciation [11] Market Data and Key Metrics Changes - The S&P 500 closed at 5,002.88, down approximately 10% year-to-date, leading to a more conservative market outlook from the company [5][6] - The company noted increased market volatility due to tariffs, uncertainty over global capital flows, and disagreements between the administration and the Federal Reserve on monetary policy [6][8] Company Strategy and Development Direction - Stifel's long-term growth strategy emphasizes the critical role of its Global Wealth Management business, which has more than doubled its revenue over the past decade [13] - The company remains cautiously optimistic about long-term growth despite current market volatility, highlighting the value of its advice-centric business model [8][9] - Stifel is focusing on recruiting higher-producing advisers and has seen success in this area, with a robust recruiting pipeline [14][15] Management's Comments on Operating Environment and Future Outlook - Management believes that while current market conditions present challenges, they do not foresee a recession and remain optimistic about long-term growth [7][8] - The company is prepared to adjust its financial guidance if current conditions persist, but remains confident in its positioning and long-term growth strategy [31] - Management indicated that the uncertainty around policy direction and market conditions has merely delayed significant business growth rather than canceled it [31][32] Other Important Information - The legal charge of $180 million significantly impacted non-compensation expenses, but excluding this charge, non-compensation expenses were below street estimates [19][27] - The company has seen a decline in client cash levels due to typical seasonality related to tax payments, but venture and fund banking deposits have increased [22][82] Q&A Session Summary Question: Adviser recruiting and market conditions - Management noted that recruiting has been active, with high-quality teams being added, and expressed optimism about continued recruiting success despite market volatility [40][41] Question: Wealth commissions and market activity - The decline in wealth commissions was attributed to limited activity early in the quarter, with a pickup in client engagement noted after March [48][49] Question: Organic growth and recruitment strategy - Management discussed adjustments to their recruitment approach to remain competitive, focusing on higher productivity teams and holistic services [72][73] Question: NII outlook and cash balances - The outlook for net interest income (NII) for Q2 is projected between $260 million and $270 million, with cash balances experiencing typical seasonal outflows [75][78] Question: Public finance and fixed income outlook - Management indicated that public finance activity remains healthy despite policy uncertainties, while fixed income trading is expected to improve in the upcoming quarters [96][100]