The five year bull market is still going with no signs of slowing, volatility is at an all-time low, and The Fed is still holding down interest rates.
As Oppenheimer’s Chief Market Strategists John Stolzfus put it — “The punchbowl remains on the table, the record player keeps spinning tunes — and the party’s still lively.”
So everything is just swell on Wall Street right?
Wrong. Most of Wall Street is miserable, and it’s not hard to understand why. BTIG’s Dan Greenhaus tweeted out this chart that says it all.
Wall Street’s brokers make money off of volume (the number of orders waiting to be filled in the market) and Wall Street’s traders make money off of volatility (the spread of a given security’s price over time).
If there’s little volume and little spread, there’s no money to be made.
And right now volatility and volume are going in one direction.
In this environment, everyone’s job is at risk. JP Morgan and other banks have already warned that trading revenue is going to take a serious hit in Q2.
Earlier this month, JP Morgan CFO Marianne Lake went as far as to say that this malaise may hit employees in other parts of the bank as well. Specifically, Lake said that “too much capacity” in bond and currency trading could lead to revenue so anemic that layoffs and compensation cuts may have to be made throughout JPM’s investment bank — the biggest investment bank in the world.
So who’s having fun here?