Pre-Market Stocks: Wall Street’s Dividend Outlook Is Worrying

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New York

As bankers brace for a dismal bonus season, Ferragamo’s belt buckle is tightened across Wall Street.Year-end payouts, which typically make up a large portion of financial sector compensation totals, are expected to fall sharply as M&A dry up, Inflation continues and the threat of recession has increased.

what happened: Bankers who help integrate companies could see their bonuses drop by about 20% this year, while those who help companies raise new capital could see their salaries drop by 45%, according to a new report from compensation consultancy Johnson Associates. These figures have been adjusted for inflation.

“It’s been an exceptionally bad year,” said Alan Johnson, managing director of Johnson Associates. “I think there will be a lot of unhappy people. Some will look for other jobs … but there will also be layoffs.”

The report is through An analysis of economic data and consultations with the biggest banks and hedge funds found that hiring is expected to slow sharply and layoffs will begin as the threat of a recession increases pressure on employers to cut costs.

Why it matters: While bankers may be spooked by the news, others may gloat. After all, an early career salary in the industry is around $200,000 with a pre-bonus. But even if you don’t work in finance, you should be paying attention to the news, Johnson said.

Some people may think brokers are making too much money from home sales, but they still want to sell because it’s good for their community, Johnson said. The same goes for bankers, he added.

Trading usually indicates a healthy economic environment.

“It’s the canary in the coal mine for the economy, and if the canary dies, it doesn’t do anybody any good,” Johnson said.

A bigger problem: M&A deal volumes to slow significantly in 2022 as dealmakers grapple with rising competition Interest rates and a possible recession.

Global M&A deals totaled $642 billion in the third quarter, according to Refinitiv data. That’s down 42% from the previous quarter and the lowest sales for the same period in a decade.

The mergers and acquisitions market is a leading economic indicator, said Morris DeFeo, chairman of the corporate division of law firm Herrick, Feinstein LLP, which specializes in mergers and acquisitions. “I think a lot of the slowdown [in M&A] expect a [shaky] economy. ”

What’s next: DeFeo said performance bonuses for poor performance could eventually bring banking activity back on track. “There are a lot of people who are motivated by incentives both in terms of financing and in terms of strategy, wanting to see things move forward,” he said. “We’re not going to sit back and wait to see how things play out. That’s not in our nature in the financial business world.”

Still, it’s unclear whether the industry can overcome market trends such as rising borrowing costs. While analysts expect a small rebound in 2023, they still expect banking activity to remain relatively weak.

Wholesale prices, a key measure of U.S. inflation, rose 8 percent in October from a year earlier, according to the latest report from the U.S. Bureau of Labor Statistics, my colleague Alicia Wallace reports.

While still at record highs, it was the smallest increase since last July and significantly better than expected.

U.S. President Joe Biden released the PPI report for October on Tuesday, saying it had “more good news for our economy this morning and more signs that we’re starting to see benign inflation.”

“Today’s news — that prices paid by businesses slowed last month — comes a week after news that prices paid by consumers also slowed,” Biden wrote Tuesday. “And, today The report also showed a slowdown in food inflation – a welcome sign for households’ grocery bills as we head into the holiday season.”

It was the second inflation report this month to show signs of cooling in price increases plaguing the economy. Last week’s consumer price index rose 7.7% in the year to October, well below economists’ expectations of an 8% increase and the slowest annual rate of inflation since January.

Federal Reserve Vice Chairman Lyle Brainard said on Monday that the CPI data was “reassuring,” suggesting that rate hikes appear to be taking hold.if Economic data continues to show that inflation is falling, and the central bank may reduce interest rate hikes in the future.

Amazon on Tuesday launched a virtual clinic to treat common health conditions, including allergies, acne and hair loss, the latest move by the e-commerce giant to expand its presence in the healthcare industry, my colleague Catherine Thorbecke reports. .

The service, called Amazon Clinic, is a “message-based virtual care” option designed to give “customers access to affordable virtual care options when they need it, the way they need it,” Dr. and managing director Nworah Ayogu said in a blog post.

Amazon’s footprint in healthcare has gradually expanded in recent years. Acquired online pharmacy PillPack in 2018, It later launched its own digital pharmacy, Amazon Pharmacy, in 2019. Earlier this year, Amazon agreed to buy One Medical, a membership-based primary care services company, for $3.9 billion.

big picture: Amazon isn’t the only big tech company trying to cash in on the healthcare industry.

Google (GOOGL) shut down its health division last summer after it came under fire for a lack of direction. It moved some health programs to other parts of the company.

Alibaba (BABA) and (JD) also operate online pharmacies.

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