Harvard Business School Market Indicator Flashes Huge Warning

harvard commencement 2004

Photo: AP

Harvard Business School graduates are flocking to Wall Street in numbers not seen since 2008 — which could be a very bad sign for the markets.Around 38 per cent of this year’s HBS class took jobs in “market-sensitive” industries including investment banking, hedge funds, venture capital and private equity, up from just 31 per cent last year. (You can look at the HBS data right here.)

For years, a consultant named Ray Soifer has analysed the career paths of freshly minted Harvard MBAs looking for signs of the economy.

According to Soifer, when more than 30 per cent of HBS grads take Wall Street jobs, it’s a strong sell signal.

It’s not precise timing. Soifer’s HBS indicator first flashed a sell signal in 2005, years before the market came crashing down. It peaked in 2008, when 41 per cent of the Harvard MBAs went to Wall Street.

This year saw a huge growth in the number going to hedge funds, from 4 per cent of the class of 2010 to 7 per cent in the class of 2011.

Private equity also expanded rapidly, from 9 per cent to 14 per cent.

The share going to investment banks and investment management held steady, at 10 per cent. Venture capital’s share actually shrank, from 3 per cent to 1 per cent. So perhaps talk of a tech bubble has gone too far.


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