It wouldn’t be the tail end of 10 years of Federal Reserve-catalyzed market manipulation and price euphoria if Wall Street executives didn’t get their share and cut themselves even bigger bonuses this year, just as the centrally planned party is about to end. And that is exactly what is happening.
According to Bloomberg , traders, money managers, commercial bankers and underwriters are all slated to get bigger bonuses this year. The only group slated to face a bonus cut are merger and acquisition advisers according to a closely watched annual report from compensation consultants Johnson Associates Inc.
This is the second straight year that most of the industry is going to get what are described as "moderately" higher payouts. The report projects that stock traders and investors making long-term bets will do well while those advising on M&A are feeling the brunt of the recent market volatility which has impacted overall deal activity and may even see a slight decrease.
Alan Johnson, the firm's managing director told Bloomberg that "there was a lot of day-to-day stuff and that’s where these traders make money - in the volatility. It’s not like they were extremely volatile, but more so than in recent years."
Here is how the report estimates that bonuses will rise across Wall Street:
Stock and bond salespeople also had a busy year according to the report, and were also helped along by the occasional bursts of market volatility. On the other end of the market - and volatility - spectrum, private equity managers saw the benefits of inflows into their funds. Firm managers, i.e., the executives, controllers and attorneys at the tops of financial firms, are also set to get raises. Many of these raises are a result of the tax code overhaul which helped bolster profits across the nation.
Meanwhile, a silver lining for M&A bankers is that while they may be slated for a modest bonus cut, they still get the highest bonuses on an absolute basis.
As "booms" go on the street, however, this bonus increase will be short lived as 2019 is already stacking up to be not as optimistic looking, and Johnson warned that "We’re not seeing 2019 as rosy. The report predicts banks will probably face geopolitical turbulence and pressure to lower fees next year, while new technology eliminates jobs and makes it easier for firms to pay less."
That is, at least until the Fed's next round of "stimulus" comes through.