Job cuts are coming to Wall Street

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The job cuts could spill over from the tech and crypto sectors to Wall Street. The New York Post reported that bankers, brokers and traders may have to start worrying about upcoming layoffs.

The confluence of the Federal Reserve’s interest rate hike, runaway inflation above 9.1% and general uncertainty over macroeconomic and geopolitical events could lead to a slowdown in initial public offerings (IPOs) and other trading activities. According to Job“The layoffs will ravage the industry’s workforce by at least 10% – and that bloodbath could be in full swing by the end of the year.”

“Boitiller” in the summer

CNBC reported that the securities industry is “limping in the traditionally slower summer months” as the stock market is in bear territory and IPOs are down more than 90% from a year ago at the end of the year. same era. There hasn’t been the same steady stream of mergers, acquisitions, SPACs and other deals that were in effect until fairly recently.

The fate of bankers could follow the same trajectory as investment banking earnings, not unlike stock charts that reflect a revision to 2020 to 2021 levels. As hiring has rapidly increased due to pent-up demand, banks may recognize that they have too many people for too little investment activity.

Reduced workers in Fintech and Cryptos

Fintechs laid off more than 4,000 workers in the first half of 2022, according to analysis by Tech Crunch data from Layoff.fyi, a site of downsizing companies and people impacted. These figures do not include cryptocurrency platforms. Recently, Gemini and Coinbase laid off staff and imposed a hiring freeze. An uncomfortable number of crypto exchanges, a digital asset-based hedge fund, and other related entities have filed for bankruptcy or are in deep trouble.

What led to the need to downsize Wall Street

During the pandemic, there has been a dramatic increase in day-trading activity. In a better-than-ever environment, buoyed by cheap and low-interest borrowing rates, commission-free trading and unbridled euphoria, people stuck at home have traded stocks and cryptocurrencies with reckless abandonment. The market has sold off sharply, which may spell the loss of an entire generation of investors who have lost all of their gains for the past two years. They may distrust the system and choose not to return.

Tech employees were shocked when they received their pink slips. For younger cohorts, working at big tech companies and big-name startups has allowed them a lavish life. They were paid extremely well and received stocks and options in their compensation package that could make them rich.

The bubble burst when the Fed and the United States government halted quantitative easing, pumping trillions into the economy and sending stimulus checks to families. These measures kept people and businesses afloat, but also sowed the seeds for a rapid rise in inflation. As interest rates rise, venture capitalists, startups and corporations cannot get artificially low cheap capital. The rug was cut under the sector and tens of thousands of people were reduced.

This experience may strangely mirror what has happened in the financial sector as well. Wall Street exploded during the pandemic and after the economy reopened. Now it is experiencing a slowdown. The hot real estate market cooled as potential buyers saw significantly higher mortgage and interest payments and pulled out of home buying disputes. Wells Fargo and JPMorgan both laid off staff in their mortgage units as high interest rates made buying a home more expensive and out of reach for many Americans.

There’s hope on the horizon

Similar to the pampering of technical staff, Wall Street pampered its young junior bankers with more money, Peloton bikes, tech gadgets, bonuses and other incentives.

There may be a glimmer of hope. There’s a saying on Wall Street related to investing: “Sell in May and walk away.” Summer on Wall Street is historically slower than the rest of the year. Senior executives leave Manhattan to decompress in the Hamptons. Big bank executives could wait to see how things develop and book cuts until September. It buys time to call Fed Reserve Chairman Jerome Powell’s bluff.

Powell and Treasury Secretary Janet Yellen miscalculated the economy, saying inflation was only “transient”. Unfortunately, the Fed woke up too late. Rampant inflation has run amok and wreaked havoc.

Powell’s jaw on the continued rise in interest rates may be rhetoric designed to warn Wall Street and other companies to take action. If the economy and labor market cool, which is the Fed’s goal to bring down inflation, interest rate hikes could be lower than expected. This would greatly relieve Wall Street, the technology sector and other companies and investors. Plus, it can stabilize the economy and plant the seeds for future growth. In the meantime, hang on to your work and make yourself indispensable.


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