Wall Street bonuses are projected to jump for the second year in a row as market volatility fuels trading demand and dealmaking makes its long-awaited comeback.
Investment bankers, traders and wealth-management professionals are all poised to see increases in their year-end incentive pay, according to a report Wednesday from compensation consultant Johnson Associates Inc.
Equity traders who help investors position their stock bets may see the biggest gains, with payouts set to rise as much as 25%, fueled by market swings.
“This is an unusually positive year across all sectors,” Alan Johnson, managing director of Johnson Associates, said in an interview. “The economy and financial markets have held up. And the banks have benefited from continued volatility.”
The trends point to yet another banner year for incentive pay following 2024’s revenue rebound on Wall Street. Last year ended with strong payouts after years of restraint, as profits soared across the financial industry.
Even amid lingering geopolitical uncertainties, an upturn in business should lead to a second year of bigger pay packages, Johnson Associates said.
The forecast follows strong third-quarter performances from U.S. banks during another volatile period since President Donald Trump started his global trade war, fueling demand on trading desks. For equity traders, bonuses may be up 15% to 25%, while their fixed-income counterparts could see a more modest increase of 5% to 15%, according to the report.
Those projections echo what other industry reports expect for payouts, with equity traders poised to see the largest bump. Recruitment firm Options Group expects stock traders’ bonuses will be almost 14% higher than last year’s pool, it said earlier this week.
Corporate clients that tapped the brakes on stock and bond sales as the Federal Reserve boosted interest rates have returned to the market. Because of the momentum, equity underwriters aren’t far behind their debt peers in terms of projected payouts, with bonuses predicted to rise as much as 8%. Debt underwriters could see their incentive pay climb as much as 15%.
Private credit and secondary offerings are some of the “stars” this year, as those markets evolve and demand for those products continues to grow, Alan Johnson said.
But that part of the credit industry has started showing cracks with the bankruptcies of auto lender Tricolor Holdings and car-parts supplier First Brands Group. The only sector that’s continued to underperform is real estate, where traditional banks have pulled back on lending.
Advice is top of mind in times of uncertainty. Strong demand for wealth-management services is set to boost incentive pay for professionals in that business as much as 10%, higher than the 5% Johnson Associated had estimated in August.
Similarly, those working in asset management could see a bump of as much as 12% on the back of market appreciation and inflows to active exchange-traded funds and alternative-investment vehicles.
Financial-industry bonuses swelled when the pandemic set off a wave of trading and dealmaking through 2021, and again last year when managers increased pay to reflect an upturn in business as well as optimism for 2025.
A forecast last month by New York State Comptroller Thomas DiNapoli said the Wall Street bonus pool will probably break records, with profits at the 130 firms that belong to the New York Stock Exchange on pace for an all-time high.
Traditional merger-and-acquisition activity has started to come back from lows resulting from high interest rates and geopolitical concerns. Advisory-sector bonuses are set to rise as much as 15% this year as M&A activity rebounds to its strongest year since 2021, according to Johnson Associates.
Full-year compensation may still change, especially with uncertainty around the economy, Trump’s changing policies and the Fed’s expected path to lower interest rates. U.S. banks will start compensation conversations in the coming weeks, with bonuses set to be paid out early in the new year.
Market volatility and uncertainty will affect some parts of the financial industry more than others, with retail and commercial banking particularly vulnerable. Bankers in those fields are poised to see their incentive pay flat to up 5%, Johnson Associates said, with lending activity lower and provisions for credit losses higher.
Overall, the positive momentum the industry is seeing is unlikely to continue, Alan Johnson said.
“Right now, we’re at the top of the hill,” he said. Next year, compensation is likely to be flat as the economy slows and losses eventually materialize, Johnson said, “because of risky bets that people have taken for several years.”
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