Bonuses on Wall Street are expected to grow for the second year in a row as market volatility drives demand for deals and the resumption of mergers and acquisitions deals finally takes place.
Investment bankers, traders and wealth management professionals are all set to receive increases in their year-end incentive payments, according to a report released Wednesday by compensation consultancy Johnson Associates. Stock traders, who help investors position their bets in the market, could make the biggest gains, with payouts expected to rise by up to 25%, driven by market swings.
“This is a uniquely positive year across the board,” said Alan Johnson, CEO of Johnson Associates, in an interview. “The economy and financial markets have held firm. And banks have benefited from continued volatility.”
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Trends point to another banner year for incentive payments, following Wall Street’s revenue recovery in 2024. Last year ended with strong payments after years of retrenchment, with profits rising across the financial industry. Even in the face of persistent geopolitical uncertainty, the resumption of business should lead to a second year of larger compensation packages, according to Johnson Associates.
The forecast follows the strong performance of US banks in the third quarter, during another volatile period since President Donald Trump began his global trade war, increasing demand on trading desks. For equity traders, bonuses could rise between 15% and 25%, while fixed-income traders could see a more modest increase of between 5% and 15%, according to the report.
These projections reflect what other industry reports expect for payouts, with stock traders poised for the biggest increase. Recruitment firm Options Group expects stock traders’ bonuses to be nearly 14% higher than last year’s total, it said earlier this week.
Corporate clients who had slowed sales of stocks and bonds as the Federal Reserve raised interest rates returned to the market. Because of this move, equity underwriters are not far behind their debt peers in terms of expected payments, with bonuses expected to rise as much as 8%. Debt underwriters can see their incentive payments grow by up to 15%.
Private credit and secondary offerings are some of the “highlights” this year as these markets evolve and demand for these products continues to grow, said Alan Johnson. But that part of the credit industry began to show signs of fragility with the bankruptcies of auto finance company Tricolor Holdings and parts supplier First Brands Group. The only sector that continues to perform poorly is real estate, where traditional banks have reduced credit.
Counseling is on the rise during uncertain times. Strong demand for wealth management services is expected to boost incentive payments to wealth management professionals by up to 10%, up from the 5% estimated by Johnson Associates in August. Likewise, those working in asset management could see an increase of up to 12%, driven by market appreciation and contributions to active exchange-traded funds and alternative investment vehicles.
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Bonuses in the financial industry grew as the pandemic triggered a wave of trading and deals in 2021, and again last year when managers increased payouts to reflect the resumption of business and optimism for 2025. A forecast last month by New York State Comptroller Thomas DiNapoli indicated that Wall Street’s bond fund is likely to break records, with profits at the 130 companies listed on the New York Stock Exchange heading toward historic highs.
Traditional M&A activity has begun to recover from low levels caused by high interest rates and geopolitical concerns. Consulting industry bonuses are expected to rise as much as 15% this year as M&A activity returns to its best level since 2021, according to Johnson Associates.
Annual compensation could still change, especially with uncertainty about the economy, Trump’s shifting policies and the Fed’s expected path to lowering interest rates. US banks will begin talks on pay in the coming weeks, with bonuses expected to be paid early next year.
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Market volatility and uncertainty will affect some parts of the financial industry more than others, with retail and commercial banks particularly vulnerable. Bank employees in these areas should see their incentive payments flat or up by up to 5%, Johnson Associates said, with lower credit activity and higher loss provisions.
Overall, the positive momentum the sector is experiencing is unlikely to continue, said Alan Johnson.
“Now, we are at the top of the mountain,” he said. Next year, pay should be flat as the economy slows and losses eventually appear, Johnson said, “because of the risky bets people have made for several years.”
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