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I think this will be more of a trend in this environment than in previous recessions because of several things -
As of now this is believed to be relatively short lived and world will get back to a more normal (in terms of commercial activity) later this quarter or in Q3. So both the economic impact may not be as bad as previous crises, and also you’ll need those workers for when it turns. Costs a lot to recruit and train.
the government has acted quickly (effectiveness will be debated eternally) and is looking like it will act again to shore up liquidity and inject cash.
this is primarily a heath crisis and in America our health benefits are tied to employment. Look for the lack of layoffs to come at the expense of bonuses, raises, and in some cases maybe even pay cuts.
Who specifically acted quickly and effectively? We learned about the virus at the end of 2019 and have the most confirmed cases in the world.
ya, and North Korea has zero cases. I guess since they’re reporting 0 they must have acted the most effective. quit being antagonistic and a moron.
President Trump did (closed borders with China first which people called xenophobic), plus he fixed the broken system that he inherited. Also there are more confirmed cases because the US has the best testing system. Lastly, the Fed acted quickly and effectively too- that's why credit markets are open and working surprisingly well (IG and HY).
General consensus is that the Fed cuts came in much earlier relative to the prior financial crisis. Plus, more confirmed cases could probably be a reflection of the level of testing in the US compared to other countries. Still agree with the notion that the effectiveness will be debated eternally.
not referring to the executive branch’s efforts to stop the spread. referring to congress and the fed.
I love how the topic gets skewed so fast lmao
Sometimes WSO is a politics board with a little wall street on the side
If you think these assurances that say “we will have no cuts related to COVID-19” mean anything come end of year bonuses/reviews and on the back of an awful year for M&A, ECM, and likely even DCM, you haven’t been around this business long enough.
I agree. a buddy of mine was told they can't promise anything yet and it depends on how much worse the situation gets. I prefer that honesty to "don't worry we won't lay anyone off". IMO they are saying this to keep moral up since everyone is already stuck at home and struggling with some of the issues that comes with. I believe lay-off conversations will intensify post Q2.
I think the assurances carry some weight. Obviously, as actual promises, they are meaningless. Who's to say what's a layoff vs. just firing a few extra "underperformers" because times are tight. So definitely zero value in the fact that it's a promise.
But more generally, if a company was planning to let a bunch of people go, it would be stupid to proclaim that you're not going to do it. So it has some value as a signal.
They have a lot of weight during the short term (i.e. while the world is shut down). And the they have absolutely no weight beyond the shutdown. There will just be far more “performance” based layoffs than normal. We already saw cuts between 5-10% of banks during the slowdown that was the end of last year / early this year and the expectation of a normal top of market style slowdown for this year. Now that we are likely to have the worst year since the financial crisis in M&A and ECM fees, I guarantee you see significant layoffs at year end due to “soft forecasted demand” and “performance issues”.
That’s fair. How was the M&A year looking before all this? Outlook wise
Going into the year the expectation was that it would be a down year. There have been a few back-to-back really solid years and election years are historically slow. Then January was the worst month for M&A in 7 years, which was worse than expected. February was a little better but Q1 ended up being down almost 30% from last year and the worst quarter since right before the election in 2016. I expect April and May to be awful and that Q2 will be similarly bad and that the year will end up as one of the worst since the financial crisis. Equity markets are slow now too and debt markets have been relatively locked down the past few weeks unless you are a large cap IG company or are willing to take extremely expensive capital.
Pipelines are bad now, as well, as companies are so inward focused right now that they don’t want to even spend the time to evaluate a lot of opportunities. You could see a large cap relative value trade or two but I wouldn’t expect significant volume on that front either. Overall I expect IB revenues (ex. Trading) to be likely among the lowest they’ve been in a decade.
No lay off assurances are like a prom night promise: “just the tip baby” and bam! Suddenly you’re fked. Hard.
Where there's smoke.... there's usually fire...
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