Wall Street bonuses are set to soar as volatility breathes new life into trading desks once left for dead

Paramount Pictures/YoutubeLeonardo DiCaprio in Wolf of Wall Street.
  • “Substantial growth” in trading and equity underwriting across Wall Street points to good news come yearend, when employees learn what they will get for bonus pay, according to a new report from Johnson Associates.
  • Equity sales and trading personnel may see incentive pay surge 15% to 20%, while fixed-income colleagues may see a 5% to 10% bump.

Wall Street workers who trade stocks or derivatives linked to equity markets may see annual bonuses surge as much as 20% as market volatility picks up and more startups head to the public markets to sell shares, according to a new report. People who work in sales and trading, regardless of their product area, are in line for a strong year, compensation consultant Johnson Associates said in its second-quarter report. At this rate, equities personnel will see incentive compensation climb 15% to 20% compared to last year, while fixed income sales and trading staff will likely see a 5% to 10% increase, the report said. These bonuses are likely to be paid in 2019 for work done this year.

Incentives for equities salespeople and traders are up “significantly” thanks to an uptick in volatility and client activity, even after a strong first quarter, Johnson wrote. Incentive compensation for fixed income trading is “gaining momentum.” The report is good news for Wall Streeters who have endured years of compensation declines and shrinking bonuses after the financial crisis and technology improvements reduced demand and left hundreds of longtime traders looking for work. The return of market volatility – which was absent for much of 2016 and almost all of 2017 – has revived banks’ stock-trading businesses across Wall Street, and even given a boost to long moribund fixed-income trading desks. Johnson Associates’ estimate for the top end of the range for equity traders is 33% higher than it was in the firm’s first quarter report. Despite a record year thus far in mergers and acquisitions activity, Johnson doesn’t expect the pace to continue and projects bonuses to fall by 5% to 10% compared with the strong performance in the industry last year. Compensation for those bankers who help companies sell equity or debt issues will be flat to up 5%, Johnson estimates. Here’s how the bonus pool for every other business is expected to fare this year, according to the Johnson Associates report:

Screen Shot 2018 08 03 at 11.23.35 AMJohnson Associates

And here’s how bonus compensation has changed across the major Wall Street industries since the financial crisis, a period in which private equity and traditional asset management have far outpaced banks and hedge funds:

Screen Shot 2018 08 03 at 11.24.58 AMJohnson Associates

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