how do i "know the markets"?
did an interview with piper sandler today. not for a traditional summer analyst internship but for a 6-month off-cycle internship with their public finance team in el segundo CA. they issue municipal bonds n shit. I pretty much bombed the interview. been depressed about it for the past like...10 hours. rly fucking sad. but anyway, one question i got asked was sth along the lines of "where do u think the market is going, what do u think will the Fed do with interest rates, and how will things balance at the end of the year?" or something like that
im a finance student (took econ then switched to finance after transferring schools - unfortunately from one non-target to a way better but still non-target lol). have a 4.0 gpa. idk if my classes just fuckin suck or if im just a dumbass but i dont know how to talk like i know shit about the markets. ive tried reading WSJ before but like, what do i look for? like im gonna be honest it doesnt come natural to me and i dont know how it does for other people.
I noticed this with some banking oriented people. Can break down a wacc and DFC great but clueless for like public market based questions that are off intuition and a general feel.
The one hint I can give to this is that one wants to be realistic. Low interest rates means everyone’s borrowing and spending money like crazy, especially in these two years. We have inflation for the first time in 40 years. Realistically rates can’t be near zero forever, we’re not japan. Similarly I think the fed announced like 6 rounds of interest rate increases, however, increase it too fast and the market can get spooked. The answer is somewhere in between these facts.
Super dissapointing honestly… I loved trading in college. My friends all are even still in a group where we send in news and stocks etc… it’s all on podcasts, it’s all on twitter, it’s all on WSJ.
The Fed interest rate hikes are the biggest thing going on across the American economy right now. We are experiencing 8% inflation and this is how you combat inflation. The fact you’re going into an IB interview and you can’t even somewhat hold ground in a conversation of what’s going on is tough dude. I really encourage you to start indulging in the real world of finance and not just academic bs.
ty for the honest feedback
fwiw its not like i didnt prepare an answer in advance or mention relevant news. i did (or at least tried my best to).
I talked about quantitative easing during the pandemic which meant rly low rates, allowing ppl to borrow and keep business alive, and the recent shift to quantitative tightening via the current rate hikes which are meant to curb inflation, talked about how interest rates moves opposite to bonds, mentioned in particular how municipal bonds are actually a good thing to consider as part of ur portfolio as they've outperformed treasuries in the past 2 fed rate hikes, theyre rly safe, rly low default risk, and also not bad returns mostly on the basis of the tax-exempt nature of the bonds. and how due to the cyclical nature of rate hikes, if u time ur investments right u can buy a municipal bond and make money when interest rates go back down in the future. but like, this is all from google (investopedia, some article i read from pimco, etc.). i just didnt feel like it came naturally to me. had to look some stuff up. like how bonds were doing n shit. it didnt feel "genuine". thats why i asked the question.
In short, I think you had a decent response for a student. Not great… but your response shows you understand the concepts. Regarding how to make it feel genuine.. it’s somewhat difficult unless you make markets your passion and stay up to date on a frequent basis, not just prep the week leading into the interview. For me it’s easy.. I work on a bond desk. When I was in school though… I didn’t fully grasp all the levers at play or have a well thought out thesis for what was going on in the macro. Chin up friend, more opportunities will present themselves and you’ll do better next time.
but at least i had sth for that question. interviewer then asked me 5 key elements of a pitch.
ive never done an actual "pitch". the last time I pitched something was freshman year of college to local businesses and i did not use powerpoints there. we just pulled up to local stores and restaurants and asked if theyd be willing to donate supplies/food to help us host this event for this management course i had.
the last time i pitched something to actual companies with powerpoint was in fkn high school and i had no fkn clue what the hell i did for that or what the "key elements were"
bullshitted an answer and i know for sure i messed up that question.
It sounds like you were on the right track. I’m not sure if the muni answer was great considering if they were already issued they’re gonna be worth shit after the hikes. Who wants to buy a 1% coupon muni from 2021 after rates go up. But you tackled their answers well.
How I do it when it comes to markets questions (which almost every finance interview will ask) is to get a good sensing of the broad and overall trends going on now.
Right now its clearly: inflation. So talk about your understanding of inflation and how the rates will be hiked in order to combat inflation. standard solutions and explanation then add some other "general market knowledge" like how else people can combat inflation in their own asset allocation eg allocating more to alts/or other hedges of inflation and statistics that back up such things. You can even talk about what you're personally bullish about in this time of inflation and in general.
Alts are great right now. Instead of losing 8% sitting in cash YoY, you can lose another 10% on top of that!
Twitter is really, really unironically good, if you follow a small but good set of people (ideally not verified or those with massive following, as those tend to be virtue signaling and waffling a lot, i.e. good content is thin).
Can you recommend some good Twitter accounts to follow?
mind giving a few recs?
I follow about 20-25 people tops so these are just from my active memory: Christopher Bloomstran, Fred Liu
Lyn Alden, Luke Gromen. Great macro analysis.
There's no good answer for "How you know the markets". Personally, I love this question because it's meant to show how well you understand things broadly. The easiest way to prep for this is to read everything you can and try to piece it all together like a big puzzle. In terms of the questions you presented, where do you think the market is headed? It's a high-level question you can direct any way you want providing you can back it up. If you think we're entering into a recession, then you can start by discussing how the market has done, what's driven the performance, and dive into what's happening (ex. inflation, commodities concerns, the war in Ukraine, flight to safety, etc) to explain why these issues are going to drive a recession. In terms of interest rates, it's about laying out a story to explain why you think that the rates are going to go up or down. It's not just what happened in the past, it's drawing on what's happening now. Discussing that the fed is going to raise rates 6 times is a good start, but you have to highlight what that means (ex Rates go up, borrowing goes down, spending declines, etc) and how it will impact the market. As far as the last question - where do you think we end up year-end, keep it broad but have conviction. In this case, I would argue that there will be a decline in new issuances because of the higher interest rates despite higher demand for yield, concerns over the tax base in a number of states with declining populations (ex. California, NJ, NY) will make it harder to repay debt without raising taxes and further pushing people out, rising costs of construction and labor for publicly financed projects will have a harder time being funded, etc.
At the end of the day, these kinds of questions are meant to understand your broader understanding of how things are connected and how well you can articulate your position. It's meant to show that you can see the bigger picture and really get how connected things are.
Just watch CNBC and regurgitate what others say - it’s not hard I mean most sell side guys aren’t geniuses by any means. If you really want to understand than I would suggest reading Ray Dalio / warren Buffett etc.
Read long-form journalism rather than the shorter articles you might find in the WSJ. Read the Economist, Bloomberg Businessweek, and Bloomberg Markets Magazine (only available at magazine stores/through Bloomberg Professional). The longer articles have less minute-to-minute information and more trends/mechanics of movements. They also have more page space to explain what is going on and why, rather than just mention that something is going on. The key throughout all of your reading is to always ask questions, and always look-up information you don't know. Knowledge compounds. Keep reading WSJ and longer stuff like the economic/finance sections of the Economist and you will know quite a bit in a couple years.
Twitter. It's the most underrated social media by a longshot and the most powerful news aggregator on the planet with very minimal setup requirements. You can absorb hundreds of headlines in minutes by following the right accounts. And you can then dive into the longer form stuff from there.
But of course, the prerequisite to all of this is actually being interested in how money flows throughout the world economy and markets. Frankly, I don't get the impression that you are, otherwise you already would be doing this. It separates the processors from the critical thinkers / problem solvers, imo
Agree, I would also add / echo that it takes time to develop a set of people that you follow which is not too big but at the same time pretty diversified. From my experience, it’s just trial and error - follow for a while, see if the content sticks / resonates with you, if not unfollow, as Twitter very quickly can lead to information overload.
read up on geopolitics and central banking, then learn how it affects markets (reflexive relationship). That's how I go into it; when I interviewed and was asked about macro outlook I didn't pull out the giga-normie
>muh inflation
>muh unemployment
hit em wit da
>>>>CDS spread indexes too high
>>>>orange juice and wheat futures
>>>>fractional reserve banking
essentially things that are akin to esotericism to 95% of sophomores interviewing. Stood out and got offer. Very epic!
For these type of questions I don't even think they care that much about your conclusions, they just want to make sure you have a genuine interest in markets and keep yourself informed. In interviews everybody will tell them them that they have a real interests for XYZ, but if you don't even bother keeping up with the news how passionate are you really?
Best places to look for information, for me, are Twitter and Financial Times. (Check if your uni offers a free subscription, mine did) Do not "look for something specific", but just browse it a little everyday to see if an article catches your attention. If really nothing catches your attention then either you'll need to push yourself or you're just not interested.
Reading WSJ should be plenty, but it can’t just be reading a few articles the day before you interview. Read every day for 30 mins. Just skim every article on “stocks down on Powell announcement” “markets up on Ukraine peace talks” etc. you’ll be able to piece together the full story on this over time and develop a thesis
If u have an interview for a specific product group, read the most important things that happened in the space recently. For my interview it was the increasing tension of Russia and Ukraine, and the announced fed hikes and how the ECB responded to that announcement. Now currently it would be good to know how Russia and Ukraine still impacts the market (almost neglible), inflation spikes, interest rate hikes etc. Knowing the facts is just the first part, then you should be able to explain from a high level how it would impact investors in the market and what the consequences are for pricing bonds for example. And do not paraphrase it from a technical standpoint, which I had done in the past, but mention consequences that matter E.g higher interest rates lead to more investors jumping to Investment grade or Sovereign bonds.
For Macro stuff the QTR pod is great. Always commenting on the fed
Echo what everyone says above, but would throw in Grant’s Interest Rate Observer - they have a daily newsletter that’s free. They are pretty strongly opinionated, but it’s a different angle than CNBC, Bloomberg, etc usually take and is usually less dry.
Reality is that your classes would've never prepared you for something like that. You had an interview 2 weeks after the mid-March meeting; going into the meeting, the market was fine with 7 raises while not liking intra-meeting raises or 50point rug-pulls; at the meet Fed signaled rates of 1.75-2.00 by the end of the year (I believe the median was 1.9?), then the presidents of different Feds started to make hawkish comments and the market reacted by expecting more rate hikes. You probably never even ran into the scatter plot, and it's also likely you don't know what the Fed's forecasted GDP growth and inflation for 2022 are if you didn't see that file. Unfortunately, that is a hole that you can't come out of during an interview.
Personally, I am very aware of what is going on in the market and I suspect it's due to the sources I use. The most relevant stuff I always get from SeekingAlpha, WallStreetBets, the Investing.com economic calendar, and MeetKevin/Graham Stephan on YouTube. In my opinion, utilizing easily digestable outlets like this which keep the BS (I'm referring to a very different type of BS here, WSB has its own sort of BS) to a minimum is essential to keeping up with the content. They'd never ask you about the foreign policy type stuff you see in MSM, so why would you use those sources to keep up? And even if they did, most people here are sharp enough to build a logical case on-the-go for a potential question.
You dont have a crystal ball, and if you did you would run money not work for them. I think they either want to try to stump you, or see if you will agree with whatever opinion that they have to validate their job. Dont sweat it. No real right answer. I do know that when I interview people even if I nod and agree with what they say, i know when they are spinning Szhit and the funny thing is, the more i nod and smile, the more they spin it. Its almost comical how bad they can be. Just tell honestly what you think, but if you dont know, its better to at least say that. Remember, even a fish doesnt get in trouble if it keeps its mouth shut.
Quia esse aspernatur assumenda. Laborum quis minima quisquam sit. Earum dolore voluptatem expedita.
Impedit voluptatem reiciendis voluptas commodi. Molestiae sunt distinctio voluptatem et consectetur aperiam et. Voluptas rerum similique magni voluptates. Vel soluta molestiae qui reiciendis. Magni sed quia sed optio nulla.
Quis labore qui fugit doloremque veritatis deleniti. Tenetur et sit nisi exercitationem molestias temporibus quidem quis. Non explicabo et tempora. Eligendi cumque earum repudiandae veniam nobis. Repellat nihil nulla nam quo dolor harum qui.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Velit iusto est vitae sed reprehenderit eum ut. Maiores officia occaecati quasi aperiam enim sunt qui fugiat. Nulla itaque cupiditate esse qui consectetur quibusdam. Quidem ipsa eum molestiae qui odit. Nobis et vitae quis dolorem.