Wall Street’s Year-End Bonus Prospects Are Improving

The sun could be shining a little more brightly on Wall Street by year-end bonus time. (Photo by ANGELA WEISS/AFP via Getty Images)

Things are looking up for Wall Street’s year-end bonus season, at least for the sales and trading desks.

As of midyear, bonuses are expected to rise across most financial services sectors. That’s according to the latest estimates of year-end bonus trends by New York-based compensation consulting firm Johnson Associates.

Market volatility during the second quarter, marked by fluctuating Trump administration trade policies and geopolitical strife in the Middle East, boosted the prospects for stock and bond traders in particular. Equity sales and trading bonus pools are tracking for gains of 20% to 30%, and for fixed income sales and trading by 10% to 20% over last year.

Equity underwriting, on the other hand, is seen with year-end bonus pools tracking flat to down 5%, the outlook found, citing a slow calendar for initial public offerings through the end of June. Bonus funding for deal advisory is seen flat to up 5% from last year as the merger & acquisition pipeline builds.

Bonus pools in bond underwriting are seen rising 5% to 15% as companies looked to refinance in the second quarter.

Johnson Associates, which bases its projections on proprietary information from its clients and publicly available data, said traditional asset management workers could see bonuses rise 2.5% to 7.5% over 2024, noting that markets have recovered from their early second-quarter lows.

It said wealth management and family office workers could see bonuses of 2.5% to 5% over 2024 levels, driven by asset inflows, growth in assets under management, and the expansion of alternative investments.

Hedge fund bonuses could be flat to up 5%, and insurance bonuses could be down 5% to up 5%.

Estimates are much more positive than they were in Johnson Associates’ first-quarter report, when it noted muted investment banking and commercial banking trends, less IPO activity, and investors shifting to lower-fee products.

In contrast to a “pretty gloomy” first quarter that included the chance of a recession, the latest report reflects that “markets are up, the S&P is up 7%, and fixed income is up,” Chris Connors, a principal at Johnson Associates, told Barron’s. “The stock market has been incredibly resilient, and the upswings from April lows have had a positive impact on incentive funding.”

It now sees company incentive pools growing up to 10% across asset management and major investment and commercial banks.

On the tariffs front, despite ongoing geopolitical concerns, equity markets have rebounded, and companies don’t seem to have let tariff uncertainty stand in the way of their business operations. The European Union said it was going to delay its retaliatory tariffs on the U.S. for six months to allow for more trade talks.

One trend that Johnson Associates noted in its first-quarter report is likely to continue. Targeted layoffs driven by artificial intelligence, technology efficiencies, and margin pressures are expected to continue. “In terms of aggregate head count levels, they are looking at how they can leverage AI to be more productive,” Connors said.

Write to Janet H. Cho at janet.cho@dowjones.com