S&T Desks During Recessions
I'll be working within FI S&T next summer and would appreciate some help regarding which rotations to choose. I'm interested in either Rates or High-Yield Corporates, but am worried about the effects of a potential recession in the US in the coming years. Which one of these desks would hypothetically be in better shape in the event of a recession? Thanks
linear rates (govt and swaps) have the most potential....they will see large flows...good volatility and liquidity...and successful traders from these desks often goto hedge funds for the big bucks.
Agreed on rates
rates, fx, govies, HY, commodities
What effect would a recession have on volume/volatility for fx products?
I disagree with the posters above. I also think they may be conflating volatility with recession.
First- Rate desk, and other highly commoditized products, continue to cull headcount in favor of automation. This desire for efficiency will only be exacerbated if/when we hit a true recession.
Second- a successful trader in virtually any product will have the opportunity to move to the buyside for the 'Big bucks'- so that shouldnt be your motivation. Although this is occurring less frequently now a days.
Third- My issues with rates is contingency plans. If HY trading doesnt work out, you could arguably pivot into credit research, lending, corporate banking, etc. If rates trading doesnt work out, there are limited options outside of risk management, which would also be available to you as a former HY trader.
Just my 2 cents.
How about trading Munis at a top MM? Seems like a flight to safety asset, quite illiquid, bullish if democrats get elected and hike taxes (bc of tax benefits to munis), and uncorrelated to corporate markets (equities and IG credit). Thoughts?
I agree. 100%. That's. why I'm in commodities now
Still relatively new to equity trading but what I've seen so far - maybe this will add some context?
1.) In volatile markets like these past few weeks, firms are trading more frequently. Maybe they are rebalancing their portfolio, adjusting their view points, etc. This is good as an agency/low-touch business since more volume lead to more commission (even though commission on shares is in mills).
2.) In volatile markets, spread widens dramatically which will reduces liquidity. A good market maker should be able to capitalize on this (again, assuming you are making the right calls and you have inventory).
3.) Electronification will always be there - regardless if its volatile period or not. Should try to pick a desk where you are on the right side of electronicfication.
4.) Also the idea of big swing moves in the market is pretty rare (Haven't seen it yet, happy to be wrong). Your algos are focused on reducing execution cost, timing cost, and having a solid performance relative to your benchmark. All while simultaneously increasing or decreasing your exposure. Big swing moves in trading does not happen because you don't want to impact the market and cause disruption. If you do, the SEC while come asking for more color.
Probably went on a tangent...
What do you think about Equity derivs ?
Sorry I am useless there - all i know is that my firm is putting in money to advance/invest in that space. And from what i've seen our derivs desk use the algos to trade the underlying stock. The names they are trying to trade are super illiquid. So harder the name plus the more illiquid it is - better commissions. But again not as expose in this world except when they trade the underlying stock/basket on our algos. A lot of talk about automation - derivs desk is definitely affected by it. But there will always be a need for a people to add color/context to these complex strategies/products.
Emerging Markets...these guys are always in demand..especially if you are bilingual
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