Decline of Bond Trading on Wall Street Influencing MBA Careers

As the world’s government and business leaders congregate in the Swiss Alpine town of Davos for the 2018 World Economic Forum, Wall Street is in a more precarious situation than usual. Business schools that serve as a pipeline for management at investment banks and financial firms are wondering what this means for career placement. 

Headlines about a soaring stock market might make you think otherwise. The Dow Jones Industrial Average has gained more than 42% between the time when Americans elected Donald Trump president in 2016 and Jan. 22, 2018, according to CNBC. It is riding high on news of tax cuts and deregulation.

At the same time, however, Wall Street banks are experiencing losses in their fixed-income trading, which The New York Times recently referred to as “their lifeblood.” For years, the buying and selling of bonds, currencies, and complex securities generated billions in income for investment banks. They came to rely on it. By 2016, however, the $103 billion that 12 investment banks had earned from fixed-income trading fell to less than $76 billion, as reported by The New York Times. 

Then, Goldman Sachs, arguably king of Wall Street (and the world for that matter), announced its first loss since 2011. It placed the blame on a one-time $4.4 billion charge, a result of the new Trump tax law. Analysts, however, are looking deeper.

“But the results announced on Wednesday also revealed a decline in Goldman’s trading might, which has been drained by a potent combination of placid markets and quiet clients,” according to The New York Times. “Revenue in its business of buying and selling bonds, commodities and currencies — historically an engine of Goldman’s results — sank to $1 billion in the fourth quarter, half of what it was during the same period in 2016. For the year, net revenue in that business fell 30 percent.”

What does this mean for business schools? That’s a complicated question. Certainly, losses could result in fewer people getting hired, especially into those high-paying jobs. It might also mean less interest among students. On the other hand, the banks might want to invest in human capital to recharge and innovate their businesses.

In fact, Goldman Sachs hires most MBAs into its Investment Banking Division and Private Wealth Management businesses, which would not be influenced by a downturn in trading, says Leslie Shribman, a spokesperson for Goldman Sachs in New York. MBA hiring levels should be on par with hiring in previous years, Shribman adds.

“Goldman Sachs is a flat organization where being part of a team is key to our culture. We provide an entrepreneurial environment with a unique opportunity to contribute to interesting and challenging work very early on in one’s career,” says Shribman. “We invest in the talent development of our people at every level with reviews, an apprenticeship model, training opportunities, internal mobility and stretch assignments to help advance our people’s careers. We also offer resources that support the health and well-being of our employees.”

Still, Wall Street has been losing its appeal in the eyes of MBA graduates. A number of factors are playing a role. Trading scandals, losses, and less generous salaries can take some of the credit for waning interest in the field. A generational shift – what’s important to Millennials – might also be having an effect. Millennials have expressed interest in better work-life balance and jobs that allow them to contribute to making a difference in social issues, not traditionally associated with investment banks.

About 23% of MBAs graduating from New York University Stern School of Business Class of 2017 accepted jobs in investment banking. This is consistent with trends in hiring at Stern in recent years, says Beth Briggs, assistant dean of Career Services at Stern. The school’s vicinity to Wall Street has always made it a popular career path for Stern students. Indeed, financial services, consulting, and technology are the top sectors employing 2017 full-time MBA graduates of Stern.

But in recent years MBA programs, in general, have attracted a more diverse student body, from varied backgrounds with different goals for the future. The same has been true at Stern.

“The level of interest in investment banking remains strong at NYU Stern and is aligned with the changes in the industry and opportunities available to MBA students,” says Briggs. “We have seen a greater diversification in our students' target industries, with a primary emphasis on roles in the technology sector.”

What is interesting is how graduates – and even students through internships – are harnessing the finance skills once reserved for banks and applying them elsewhere.

“Because of our exceptional finance faculty, NYU Stern continues to work closely with many investment banking partners and to attract students who are focused on roles in the industry,” adds Briggs. “We have seen a consistently strong level of interest over the past five years, with growing concentrations of students leveraging this finance foundation to move into roles in the technology sector. “

Once upon a time, investment banking and consulting were just about the only places for MBAs to go. Now, the possibilities for hiring are much greater. Thus, the competition for talent is much fiercer.