NEW YORK ( TheStreet) -- Investors should avoid bulge-bracket banks ahead of what could be another tough earnings season, with macro concerns such as the U.S. fiscal cliff threatening to set off a decline in stocks, JMP Securities analyst David Trone said in a report Thursday. JMP raised third quarter earnings estimates for universal and investment banks to reflect higher debt capital market activity and mortgage banking revenues, but overall its third quarter estimates are still between 5% and 35% below consensus. "We believe results should still be quite weak as trading activity remains sluggish, NIM Net interest margins tightens further and reserve releases should decline," the analyst wrote. Trone has been bearish on universal banks for some time given regulatory headwinds that limit returns to equity shareholders. The concerns mounted as the European debt crisis escalated and the threat of the U.S. fiscal cliff loomed. Bank stocks have rallied in recent weeks following the announcement of the Fed's announcement of a third round of quantitative easing. But stocks are " not cheap enough for the risks ahead", Trone writes. "We believe the probability of either a Greek meltdown or the U.S. fiscal cliff triggering is about 90%,and we also believe either event would cause a dramatic decline in capital markets stocks," the analyst said. "Thereafter, assuming no chain reactions, contagions, or major collateral damage, we expect a dramatic and sustainable rally. But for now, we wait." Here is a summary of JMP's expectations for the major bank stocks. 5.Goldman Sachs ( GS) Core EPS Forecast: $1.49 vs $2.08 consensus Outlook: Underperform "We believe it will be difficult for GS shares to do well in the midst of the EU crisis--which we expect to get worse--and the pending fiscal cliff issues forthcoming in the U.S. Central bank actions, which has pushed GS shares higher, is highly unlikely to matter much," says the analyst. Volcker rule impact is likely to be another overhang and it will take several months to work through these events, according to Trone.