‘Green shoots’ grow out of control on Wall Street

On Wall Street, “green shoots” signal a cautious optimism of better times ahead. ILLUSTRATION: CAM POLLACK/WSJ, ISTOCK (4)
On Wall Street, “green shoots” signal a cautious optimism of better times ahead. ILLUSTRATION: CAM POLLACK/WSJ, ISTOCK (4)


Bankers are dropping the phrase like seeds at spring planting, optimistic about signs of an end to dealmaking’s long freeze.

Green shoots are showing across the U.S. There’s talk Wall Street is next.

After a two-year frost, bankers are welcoming signs that dealmaking will finally sprout. On Wall Street, “green shoots" signal a cautious optimism of better times ahead.

“Green shoots" echo other agricultural references in finance, a throwback to an agricultural age when weather, seed and sun determined times of plenty or want. The “yield" on a bond or other investment harks back to crops bearing fruit.

Forecasts for a healthy harvest picked up last year. Morgan Stanley CFO Sharon Yeshaya said during an earnings call over the summer that an upbeat sentiment was “evidenced by green shoots that emerged across our businesses."

Yeshaya was trying to convey that even though there were no flowers yet, “maybe it’s turning," she said in a recent interview.

Wells Fargo finance chief Michael Santomassimo also is warming to signs of life. “While it’s still early, we are encouraged by the green shoots we are seeing," he said during the bank’s April earnings call.

Numbers back the rosy view. The total value of mergers and acquisitions is up more than 20% so far this year compared with the same period last year, according to Dealogic. Yet, it is still below the 2021 peak. Equity and debt underwriting are also up.

Bankers, perennially optimistic, always run the risk of exciting analysts and shareholders by talking up “green shoots" only to see them wither and die.

Glenn Schorr, a longtime analyst at Evercore ISI who covers the banking industry, wrote about that phenomenon last year: “While a recovery in activity is not if but when in our view, the near-term backdrop remains delicate as we wait for a little more water & sun for the green shoots to blossom."

His analysis appeared in a report titled, “Someone Forgot to Water the Green Shoots." The report yielded him a shout-out from Morgan Stanley’s then-CEO James Gorman a few days later.

Schorr’s expertise extends beyond greenbacks to greenery. He grows lettuce, zucchini, edamame and other food in his Port Washington, N.Y., yard.

Schorr cautions that gardening isn’t the same as finance. “If I plant things that aren’t going to flourish into edible objects," Schorr said, he will find out in a matter of weeks. Capital markets take a lot longer to come to flourish.

Business leaders and politicians have long used metaphors to inform and persuade. Like tiny stories, they have powerful cognitive effects that reframe events and make them easier to understand, said George Lakoff, a professor emeritus of linguistics at the University of California, Berkeley and co-author of the 1980 book “Metaphors We Live By."

“They’re not just something dumb that you say," Lakoff said. Our brains, he said, are primed to process them.

Wall Street lingo ventures beyond the farm fields. “Pipeline" refers to deal talks and banking activities at various stages. “Dry powder" is money companies have at the ready. Even saying a stock price “rose" is tied to the physical world, Lakoff said, since an increase isn’t, technically, “up." Wall Street’s focus on growth makes it “ripe for metaphor," he said.

Lakoff suspects that “green shoots" spread on Wall Street because it conveys both the delicate nature of plants taking root—and references the color of U.S. currency.

The seed for “green shoots" appears to have been planted during the U.K.’s 1991 recession. Then-Chancellor of the Exchequer Norman Lamont said “the green shoots of economic spring are appearing once again." Unfortunately for Lamont, the shoots didn’t sprout for some time.

As the U.S. sought recovery during the 2008-09 financial crisis, Federal Reserve Chairman Ben Bernanke told the TV news show “60 Minutes" that he was encouraged by “green shoots" appearing in parts of the economy. It was a welcome thought in barren times.

The phrase “green shoots" is an elegant way to hedge—another vegetational metaphor, which relates to the shielding of property. “Green shoots" suggests possibility rather than a guarantee.

Schorr, the Evercore analyst, said investment banks’ latest results are encouraging, but recoveries are fragile. Like farmers and weather, there are matters beyond the control of investors, including moves by the Federal Reserve.

“The recent move up in rates and geopolitical tensions is like a cold front that could push out our harvest season," he said.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

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