There has been a lot of talk about President-elect Donald Trump rolling back bank regulations, making it easier to profit on Wall Street.
But in the days since the election, he is already greasing the wheels for bigger revenues at banks in the near term. Financial traders can thank Trump for making the last three months of the year much busier than usual.
Trump's proposals, even in sketchy form, have thrown global markets into turmoil. He's a wild card, a self-professed agent of change. He's planning huge things with potentially huge consequences. In response, some stocks are soaring, many bonds are plunging, and companies are rushing to get deals done before rules and policies change. This adds up to lots of banking and trading business.
Bank of America facilitated some of the biggest stock-trading volumes in its history on the day after Trump's election, according to a Wall Street Journal article on Tuesday. The firm's fourth-quarter trading results will most likely sharply exceed those in the same period last year, according to the article.
Trading and banking momentum has continued at JPMorgan after a surprisingly good third quarter, while Citigroup said its markets revenue would be up "meaningfully" from last year, according to Bloomberg News articles on Wednesday.
Any way you slice it, trading volumes have been elevated in the past week. Stock activity popped.
Corporate-bond volumes were 31 percent higher in the days after Nov. 8 than during a similar period a year earlier, according to Finra's Trace data.
In the night after Trump was elected president, trading in Treasury futures was so heavy that it dwarfed anything seen even in the aftermath of the U.K. referendum to leave the European Union in June, according to FTN Financial's Jim Vogel.
This turbocharged activity builds on what's already been a good year for Wall Street traders, especially compared with years of layoffs and falling compensation. Recruitment firm Options Group predicts that annual pay for debt traders globally will grow for the first time since 2012 because of all the volatility.
Trump promises to fuel this lack of certainty and elevated activity for the foreseeable future. There's already talk about what his administration will do to the Federal Reserve, which has acted as a steadying force for markets, for better or worse. Some of Trump's economic advisers are calling for the Fed to shrink its balance sheet, which would most likely spur a significantly bigger bond selloff than the one over the the past week. Either way, higher inflation expectations could potentially force the Fed to raise rates faster than many have expected.
And then there's the question of Trump's actual spending plans and whether Congress will go along with them. As details emerge, market expectations will most certainly shift.
All this adds up to more business for Wall Street trading desks. Gone are the slow days when traders dug their nails into their thighs, wondering whether yields would ever rise again. Uncertainty is back, and with it comes lucrative trading for the banks.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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