It was a day in City finance where the market was overshooting violently and there was a strong inspiration and you were thinking – this could really do some damage.
All of this reminds me of another day in September at the start of my career, in 1992, with the ERM crisis, when the pound sterling was hit hard (and Britain was forced to withdraw from the rate mechanism European exchange).
Like then, and like the Great Crash in 2008, or the outcome of Brexit, today will go down in market history. It’s not quite as monumental, perhaps, but it’s a moment to add to the other moments.
When there are big days like this, a surge of panic can escape in public. On trading desks, however, there is a difference. For most investors, volatility is a cost, but for traders, volatility equates to wider spreads, and the more talented have more room to make money – or lose it. The ante is definitely up. The moves yesterday in the bond markets were relatively huge – we’ve gotten used to low yields for so long.
In hedge funds and fund management, you can make a career right now by doing the right thing. This is where the big bets are made. Investment banks try to manage volatility for their clients. Bond market makers will make their reputation. People will have great days and huge hours, then head to the pubs of Canary Wharf in London. And you don’t even have to be in Canary Wharf anymore. Tonight some will have a few screens at home, with all the financial data they need, next to the England-Germany game. In fact, some trading rooms aren’t even totally full these days – some traders will also be working from home during the day.
This underlines one of the big differences with those early days of my career. The screams and testosterone of those floors of decades ago are all gone, replaced by rows of desks and dutiful people staring at screens, wearing headsets. At the time, people asked me how I used to concentrate.
Today it has a different feel – we took some of the human spice out of it. Everything is so much calmer. Instead of shouting, there are just a lot of people, wondering uncertainly. Most of the commotion and noise in the trading bear pit is gone.
And with it went, in banking at least, the big risk takers who would have huge limits and take huge positions and gain or lose a fortune. We’ve regulated this in banking since the Great Financial Crash (GFC) of 2008. The level of risk that banks take these days just isn’t the same – the result of the GFC has been to reduce all of this.
And while today was important, it wasn’t like the ERM when the pound suddenly crashed 40% – it’s not going to do that. The size of currency movements is much smaller even than in 2008.
When it comes to bounties, the big bucks are earned by the city’s decision makers, not the traders – the M&A guys, and it’s been a good year for business. So there is no correlation between days like these and the types of big bonuses that are going to be released.
There’s no longer anything like a big, noisy, voice-driven market with unnecessary amounts of testosterone around the place. And I won’t fall out of nowhere at three in the morning. For bankers, this is the reality of the different post-crash regulatory environment. And the fact that I’m twice the age I was in 1992.
Kit Juckes is a macro strategist at Société Générale
As said to Harry De Quetteville