The fourth quarter of any year is a worrying time in banking. It's when bonuses are decided, costs are trimmed and jobs are cut. If you're doing badly in the fourth quarter you're exposed. If you're doing well, you're set up for 2017.
Deutsche Bank's latest 'capital markets pulse' is therefore informative. Based upon indicators of performance by market, including trading volumes and volatility, bid-ask spreads and recorded equity capital markets and debt capital markets issuance, it aims to provide a snapshot of how things are going.
As the chart below (Figure 4) shows, one area is doing far, far, far better than last year in the fourth quarter: debt capital markets high yield origination (DCM HY), Here, Deutsche's index is up nearly 95% on last year. This might be because the final quarter of 2015 was a washout for high yield originators, or it might be because Trump is seen as broadly positive for high yield credit due to his pro-growth policies.
Ranking behind high yield, European rates derivatives traders, debt capital markets originators in general, and U.S. equities traders are also having a good quarter compared to 2015. They look safely positioned for the year to come.
By comparison, M&A bankers and equity derivatives traders are having a weak end to the year compared to 2015. The good news for M&A bankers is that Deutsche Bank's quarter-on-quarter market pulse (shown in Figure 5 below) suggests things are at least looking up compared to the three months to September. Equity index derivatives, by comparison, are in a long term funk and look susceptible to cuts.
The safest jobs of all in light of quarterly and yearly trends are in European rates derivatives. Here, the indicator is up around 35% quarter on quarter and 20% year-on-year.
Deutsche Bank's analysts have also accumulated everything U.S. banks have said about their performance in the fourth quarter in a single helpful chart. Shown below (Figure 3), it highlights the extent to which banks have benefited from the post-Trump trading boom. J.P. Morgan and Goldman Sachs also sound bullish about M&A, with J.P. Morgan highlighting Chinese companies' interest in buying foreign firms.