NEW YORK – Wall Street bankers are set to reap the rewards of a volatile market yet again.
Bonuses are projected to rise 10 per cent to 15 per cent or more for investment and commercial bankers as their results outpace other sectors of finance, according to Johnson Associates.
Stock traders and investment bankers who advise on mergers and acquisitions are poised to do even better.
The forecast comes after the biggest banks reported record second-quarter earnings, fuelled by strong equity trading, advisory and underwriting.
“The banks have continued to do well, but I think we expected trading and M&A to cool off, and it really hasn’t,” Alan Johnson, managing director of Johnson Associates, said in an interview. “It’s remained strong and consistently good.”
Incentive pay is likely to rise as much as 30 per cent or more for bankers focused on equity trading, sales and underwriting, the highest of any sector, according to the Johnson Associates report, published on Aug 5.
The expected increase reflects heightened client activity amid market swings and stronger investment-banking results that helped drive bank earnings up.
The buildup of deals after years of stalled M&A activity is starting to come through, Johnson said.
SpaceX’s landmark initial public offering generated a US$500 million (S$640 million) fee pool for Wall Street firms, with Goldman Sachs Group and Morgan Stanley notching roughly US$100 million each as co-leads. Bank of America, Citigroup and JPMorgan Chase & Co took in US$75 million apiece.
Fixed-income traders are expected to take home larger payouts as well, though the increases are more modest, at 7.5 per cent to 12.5 per cent.
“The surprise really is how strong the economy has been, even with a war going on and rising interest rates,” Johnson said. “We have marched on regardless of things that would have slowed or brought things to a halt.”
Geopolitical uncertainty stemming from President Donald Trump’s shifting policies, the war in the Middle East and changing interest-rate expectations has been a boon for Wall Street, keeping markets active and trading desks busy.
Johnson Associates expects geopolitical turmoil and credit stress to remain key forces shaping the industry in the second half of 2026.
Artificial intelligence is also reshaping the sector’s workforce.
Banks are using AI-driven efficiencies to trim headcount, according to the report, and Johnson expects continued investment in the technology to further reduce employment numbers.
“The people that survive are going to make more,” Johnson said. Those “that remain will be treasured more, mentored better, though it will be harder to get a job”.
The strong market backdrop has benefited other corners of the industry as well.
Traditional asset managers have been lifted by market appreciation, while hedge funds have emerged as another bright spot, drawing their strongest quarterly inflows in two decades.
Macro funds, which seek to capitalise on broad economic shifts, have continued to outperform as investors look for ways to navigate an unsettled market environment.
Private markets, on the other hand, have not fared as well.
A difficult fund-raising environment and a slowdown in exits have weighed on private equity firms, with distributions falling to record lows.
Those at large firms could see a 2.5 per cent to 7.5 per cent rise in payouts, while small and mid-size firms are expected to see no change in incentive pay. Private-credit bonuses could decline by as much as 10 per cent, according to Johnson Associates.
Still, the finance industry overall continues to do well. The positive momentum is expected to remain for the second half of 2026 as backlogs and the economy remain strong, according to Johnson.
“The path is pretty clear at this point,” he said. “It will be a very good pay market, but not a lot of net new hiring.” BLOOMBERG
