Better trading revenues are leading to higher pay at investment banks. After years of falling revenue and post-Dodd-Frank cutbacks, traders in fixed income are once again seeing their bonuses jump. Bond traders are likely to see bonuses rise 10-15% this year, while those in underwriting are set for 10-20% jumps. M&A bankers are set to see their payouts fall, however. The bond trading business has been buoyed by rising uncertainty about the economy and politics which has led to more trading overall.
FINSUM: Pay had been falling since the immediate post-crisis rebound, so this is a big change. 2017 trading patterns could prove a reversal though, as low volatility seems unlikely to help the trading business.
There has been a lot of sideline-type talk from Trump’s team about the possibility of bringing back Glass-Steagall, the rule that separated retail from investment banking in the US for most of the 20th century. However, President Trump himself has now made clear this was a priority. “I’m looking at that right now … there’s some people that want to go back to the old system, right?”, said Trump in a recent Oval office interview.
FINSUM: Rumors and backstage comments from Trump’s team are one thing, but on-the-record comments in the Oval Office from the president are another. Given how big of a shakeup Trump is seeking in many areas, we think he is going to go ahead and try to put in place a new form of Glass-Steagall. This could be a major threat to big US universal banks like JP Morgan (JPM), Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC).
Auto stocks like GM and Ford have gotten hammered recently. The big reason why was horrible earnings reports for the first quarter. The pair saw their quarterly sales drop 5.8% and 7.2% respectively, much worse than was expected. The losses in revenue seem to point out that the peak has been reached in this auto sales cycle. Investors are also worried about the companies’ exposure to subprime auto loans, as that sector boomed in recent years. Now, used car prices are plunging as tons of inventory floods the market, which puts many borrowers under water.
FINSUM: This article points out that auto manufacturing may touch 5% of the US work force in some way, so the economy could actually be significantly weighed down by problems in Detroit.