Markets have been crazy lately, if you haven’t noticed. Yesterday and Wednesday in particular were just plain nuts, with the Dow dropping as much as 460 points before nearly fully recovering a day later. The U.S. 10-year Treasury yield moved more than it has in five years. In short, volatility is back, and in a big way.
While investors are getting jittery, volatility in markets can be a good thing for nimble sell-side traders who have been sitting on their hands with nothing to do for much of the first half of the year. In May, for example, trading volume fell to its lowest since the financial crisis.
September was a different animal though, as inflation fears in Europe and other macro trends percolated trading floors and helped save the third quarter for many banks.
Citi, J.P. Morgan, Banks of America and Goldman Sachs all saw increases in fixed income trading revenue during Q3, due mainly to the final month of the quarter, as investors began fleeing equities. And activity appears to have spilled into September. Trading units don’t necessarily need a great market to make money, just an active one.
Another interesting spot to be in during current market conditions is private equity. Yes, the IPO market may become depressed, but many in the industry have been frustrated with what most see as an inflated equities market in need of a correction. Private equity firms have been selling, but there’s been no room to buy. The shoe may soon be on the other foot.
Blackstone, while announcing strong third quarter profit on Thursday, seemed to welcome a slightly beleaguered equities markets. “These types of investment environments end up becoming some of our best vintages,” Blackstone Chief Executive Stephen A. Schwarzman told analysts.
Sitting on $42.3 billion in capital, Blackstone is indeed ready to start buying. Rival PE firms are in similar positions. They’ve been loading up on capital, just waiting for the right time to spend. That time may be near.
Interview Questions Designed to Stump Bankers, Consultants (eFinancialCareers)
Some questions, at least for those who are inquisitive or mathematically inclined, can spark interest and curiosity, especially if you get to think about them at home rather than in front of a panel of suits.
A Deeper Analysis of Goldman’s Results (eFinancialCareers)
Goldman Sachs posted strong third quarter results, but the numbers are not quite as promising as they appear. However, if you’re a junior banker looking for a job at Goldman, now is a good time to knock on the door.
Hedge Funds Falling Flat (Financial Times)
The hedge fund industry is having a rough year. Several popular bets among hedge funds, including technology and biotech stocks, have had a miserable few months, putting the industry on pace for its worst year since 2011. The old SAC Capital is still killing it though.
Poor European Bankers (Bloomberg)
European bank stocks have taken a notable bashing as of late, falling to their lowest point in more than a year. Getting paid in equity was cool there for a while, but not anymore.
Details People! (Matt Levine)
A former Wells Fargo compliance officer who conducted an internal investigation into whether a broker was trading on inside information closed the case with no findings. Two years later, said broker was arrested for insider trading. The compliance officer then altered the document to make it look like she had given the case a more thorough review. She was found out because she used the current year while “updating” the file.
New Fixed Income Team in Europe (Financial News)
Liquidnet, a U.S.-based dark pool operator, is expanding into electronic bond trading. As part of the growth, they’re building a fixed income team in Europe.
It’s Poaching Season (Reuters)
Within the last three months, Deutsche Bank has poached four of J.P. Morgan’s private bankers in the U.S. alone.
Buzz Around the Office
This Is How You Recruit (Lost Letterman)
Come fall, websites tend to issue plenty of rankings to help students prepare to apply to college. Stanford’s football team put their own list together to send to recruits: how much more money the average grad makes compared to alumni at two dozen other schools. Those schools just happened to be the others ranked in the top 25 college football poll.
Quote of the Day: “Would I ever leave this company? Look, I’m all about loyalty. In fact, I feel like part of what I’m being paid for here is my loyalty. But if there were somewhere else that valued loyalty more highly… I’m going wherever they value loyalty the most.” – Dwight Schrute