Resumes Are Wall Street’s Hottest Trade

The busiest airports might not be ready to be this busy ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

April 6, 2023

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TOGETHER WITH

Good morning.

It should be easier to get a table at Nick & Toni’s.

With COVID receding, interest rates surging, and Wall Street cutting back, Hamptons real estate is taking a bit of a drubbing. For the first time since 2019, the median price of a Hamptons home declined over the first three months of the year, and the total number of homes sold dropped 44% year-over-year. This may be good news for locals perennially stuck in traffic on the Montauk Highway, but the fact that sales of homes over $10 million fell 61% augurs poorly for the Wall Streeters that populate the Hamptons… some of the time.

Morning Brief

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It’s tough sledding for Wall Street job seekers.

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Airports are packed… and that’s good and bad.

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It’s an ETF world record.

Wall Street

Wall Street Workers Squeezed by Tight Labor Market

It’s a hard-knock life for Wall Street’s rank-and-file.

Amid high-interest rates, higher inflation, a slowdown in initial public offerings, a cooling deal market, and a still-unfurling banking crisis, the job market in America’s financial services sector is anything but sunny. In fact, it may just be the toughest industry to get a job in right now.

The Grapes of (Financial) Math

Just two months ago, the unstoppable force of Jerome Powell’s rate-hiking campaign was meeting an immovable object of a white-hot labor market — with February’s 3.4% unemployment rate marking the metric’s lowest point since Neil Armstrong’s small step on the moon. But alas, new labor data from ADP Research and the Stanford Digital Economy Lab released Wednesday shows the job market may be inching downward. US companies added 145,000 jobs last month, below estimates in a Bloomberg survey of economists.

The “financial activities” sector was hit worst of all, shedding 51,000 jobs, according to the ADP data (laid-off portfolio managers might consider a temporary sommelier gig as the leisure and hospitality industry added nearly 100,000 jobs last month). That figure tracks with recent headcount estimates from recruitment consultancy PageGroup, which told Reuters that the banks and financial services sector now employs between 5% and 10% fewer employees than a year ago.

And even the lucky ones who have been able to keep their job are taking home less:

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Bonuses, typically paid in Q1, fell around 20% for commercial bankers from last year, Wall Street compensation consultant Alan Johnson told Reuters. Meanwhile, investment bankers saw bonuses decrease by as much as 50%. Ouch.

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In the securities industry, bonuses fell by over 25% last year, according to a recent report from the New York State Comptroller’s office. And deputy Comptroller Rahul Jain told Reuters bonuses could shrink by another 15% this year.

Swiss Miss: It’s not just Wall Street. The top management brass at Credit Suisse will also miss out on their extra checks — a bonus pool projected to be around 60 million Swiss francs for around 1,000 employees — after Swiss federal regulators stepped in and ordered the company to cancel or reduce all its outstanding C-Suite bonus payments. The unusual move came amid public outcry after the state spent close to $280 billion in funding and guarantees to secure the rescue merger by rival bank UBS. Fair is fair.

– Brian Boyle

Aviation

A Surge in Air Travel Has Regulators Worried About More Delays

(Photo Credit: Anete Lūsiņa/Unsplash)

In case you haven’t noticed, airports are busy, maybe too busy.

The Airports Council International released its rankings of 2022’s busiest airports Wednesday, and while the world is returning to air travel normalcy, staff shortages have the Federal Aviation Administration asking airlines to flip the spoilers.

Expect Some Delays

Atlanta’s Hartsfield-Jackson International Airport led the way for the second year in a row, servicing nearly 94 million flyers last year. In a not-so-close second was Dallas Fort Worth with 73 million passengers, followed by Denver in third place and Chicago O’Hare in fourth. Half of the top 10 busiest airports were American. The other half included runways in India, Turkey, the UK, the UAE, and France. Altogether, there were roughly 7 billion global flight passengers last year. That’s up more than 50% from 2021 but still down about 26% from pre-pandemic levels in 2019.

Even so, air travel has bounced back strongly, especially in China, which only recently reopened for business and whose airports should reclaim top spots on next year’s list. But what about that scary-sounding pilot shortage we’ve been hearing so much about the past two years?

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The shortfall stemmed from a combination of factors — older pilots cashing in on their retirements during the pandemic, airlines overscheduling and launching more routes than they could fill, numerous pilot strikes, and a slowdown in the military-to-commercial aviation pipeline.

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However, the Air Line Pilots Association, the largest pilot union in the world, argues that is a “fictitious” narrative and that there is no shortage. Referencing FAA data, ALPA claims there are more than enough pilots to meet the demands of heavy air travel and that the real problem lies with profit-focused airline executives skirting safety standards to hire less-experienced fliers at lower pay.

Slow it down: Even if there are enough pilots, the FAA has officially recognized a concerning lack of air traffic controllers to keep them from crashing into the ground and each other. Last year, New York City area airports saw about 41,000 flight delays thanks to a dearth of tower staff, NBC reported. To reign in those setbacks, the FAA is asking airlines to cut at least 10% of their flights this summer. Thankfully, Delta, JetBlue, United, and American Airlines have all indicated they would take the FAA up on its suggestion.

– Griffin Kelly

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Stock Market

DWS Xtrackers Launches Largest ETF of All Time

Big problems require big solutions. And big ETFs. Very big ETFs.

On Wednesday, DWS Xtrackers listed its MSCI USA Climate Action Equity ETF (USCA) on the New York Stock Exchange. The climate-focused exchange-traded fund holds some $2 billion worth of assets, making it the biggest ETF launch of all time — by far.

Big, Bigger, Biggest

Like cherry blossom blooms, launching the largest-ever exchange-traded fund is becoming an annual April tradition. Last year, the Goldman Sachs MarketBeta US 1000 Equity ETF (GUSA), which provides “efficient and diversified access” to the largest 1,000 US companies, launched with a then-record $1.35 billion in assets. A year earlier came BlackRock’s US Carbon Transition Readiness ETF (LCTU), with $1.2 billion in assets.

Massive, climate-focused ETFs are not novel. But they don’t exactly have a strong track record, either:

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LCTU has seen scant growth since its launch, now holding around $1.4 billion in assets, and its share price is down roughly 5% since its launch. “It’s got anchor institutional investors that have stayed loyal but the fund hasn’t received broader investor adoption,” Todd Rosenbluth, head of research at financial consultant VettaFi, told the Financial Times.

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Meanwhile, the BlackRock World ex US Carbon Transition Readiness ETF (LCTD), which launched on the same day in April 2021 as LCTU, has seen its assets shrink from $500 million to $468 million.

Climate-Changing Opinions: “In the US there is a negative sentiment building towards environmentally friendly ETFs,” Rosenbluth said. “A successful launch with the support of a large institutional investor to a targeted approach can be a factual counterpoint that might shift the narrative.” In other words, if you want to go green, you have to go big.

– Brian Boyle

Extra Upside

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