SA 2023 Recession/Depression Doomsday Outlook

Incoming 2023 Summer Analysts and Current Bankers in the Industry,

I know we have had a few posts like this already, but as we start to get closer to the upcoming summer, I would like to get everyone's opinions on the current outlook for the next couple of years or so.

I am a 2023 SA and would consider myself someone who pays relatively close attention to world news and the current variability in the economy that we are all experiencing. However, I find it a little odd with respect to just the sheer quantity of people that don't seem to realize what is happening and the true extent of the potential nightmare that could ensue over the next year or so. I am also surprised at the number of people on Wall Street, who either do not seem to believe a (Worst Case Scenario) 1930s level of depression is possible or just stick to the position that we will see a soft landing over the next year with maybe a mild recession (some of them, of course, argue that we are already in one). As always, it is essentially impossible to truly predict what the Fed and overarching economy will "truly" look like over the next say 2-3 years, but as an incoming SA 2023, one can't help but worry a little bit.

My take: I will try to make this brief, but it appears to me that no matter how much the Fed continues to hike rates, they cannot seem to hit their "2%" target. Inflation really hasn't moved much despite the significant rate hikes. It appears to me that they will either change their target to 3% and get back to running the printer, or Powell will literally have to absolutely crush the economy completely, which would put us back to potentially a full-blown depression.

I am truly curious as to:

1) How are you (2023 SAs) feeling about this upcoming summer (hours, overall experience, return offers, etc.)

2) For those of you who are already in the industry:

What are some things you have noticed (say compared to 2021's free money pump)?

What is your honest opinion and outlook for the next 3 years or so?

Finally, aside from being as diligent, excited, and driven as possible, what would be your advice to incoming 2023 SAs for this summer?

More than anything I am just curious to see what everyone's opinions are going forward and how we are all feeling about the current economic environment.

Comments ( 19 )

Most Helpful
  • Intern in IB - Cov

As a 2023 SA , I think the experience will be extremely group dependant. Been keeping in touch with some of the analysts in my coverage group and they are still getting hammered with work. This is honestly a massive relief for me as I am more confident that the return offer is mine to win. But many of my friends that haven't done group placement yet are worried. Not sure if banks would try to move interns around to take on everyone full time, but not expecting everyone to be getting returns at the end of the summer and expect the lateral market to be dead.

benz0 , what's your opinion? Comment below:

Strange position atm. Every historical metric of an incoming recession is blinking red, yet markets and news are (relatively) optimistic. I would say we're looking at poor market returns the next few years, however, I would not agree that there will be another Great Depression. The situation is completely different, and we know more about monetary policy (although this modern monetary policy theory might end up biting us in the ass).

Frybird101 , what's your opinion? Comment below:

Just because central banker know more about monetary policy doesn't mean anything. They knew plenty about it in the mid 2000s and that didn't help. These are all just bureaucrats at the end of day.

benz0 , what's your opinion? Comment below:

Yeah in a way, but I think looking back at the Great Depression the extremely tight monetary policy was stupid in hindsight and the Fed woul not act as irresponsibly again

rumanddone , what's your opinion? Comment below:

I think we're certainly at risk of 1970s style stagnation for the coming decade (wages and housing prices are sticky and high inflation is now baked into expectations) and we won't be seeing 10% yearly returns in the equity market for the coming decade but agree it's not going to be a 2008/1930s type meltdown.

Frybird101 , what's your opinion? Comment below:

>"can't possibly predict where the economy"

>precedes to predict where the economy will be

effin interns…

It's the same advice as always, work hard,  work smart, do well, and get a little lucky

  • 2
  • Analyst 2 in IB-M&A

Any chance lateral market for 2nd/3rd year analysts open later this year? Only chance I can think of are if bonuses are really bad and people leave but don't see deal flow meaningfully picking up.

  • Analyst 1 in IB - Cov

Economy will slow down, but it's not going to be a real depression. We'll be in the red zone if unemployment rises, which will be a consequence of additional rate hikes. Fed should've been more aggressive from the start, instead of prolonged rate hikes.

Expect my firm to move incoming FT'er's around. Many FT offers weren't group dependent. Also hard to justify the hours, with lower bonuses. If I hadn't landed in a such a strong group, I would've dipped

  • Intern in HF - EquityHedge

2023 SA but for market neutral HF - think returns should be fine, fund is actually growing so looking a little optimistic.

stillbreakingin , what's your opinion? Comment below:

Replies so far are quite cute and reinforce my passion for markets haha. 2's & Spoos was the trade into EOY22 (Short 2YR USTs & SPX). Is this the best 'clued in' low turnover allocation into 23Q3? I think not. Market repricing upcoming FOMC to +50bps vs last meeting might actually create some vol soon (finally). I'm jaded with US financial <> monetary policy disconnect and waiting for fireworks + other random geopolitical crap to kick off, let's see some action. I'm not long vol because it's cheap, i'm long vol because it makes sense. I have directional exposure in commodities & crypto, somewhat hedged with calendar spreads to my bias and tolerance + some other stuff. For the love of God can we have a move to either direction pls.

  • 2
  • 1
  • Prospect in HF - EquityHedge

This comment is a wso masterpiece. Extreme arrogance, minimal EQ and macro podcast summary with maximum jargon. Hints of autism but nothing explicit. It's a beautiful thing to see

  • 5
stillbreakingin , what's your opinion? Comment below:

Haha maybe I don't need 'to speak to someone' and should just get it all out on here, with your wisdom & reputation, you might be useful. With regards to the 'tism, I counter your comment with i have had a few glasses of water and a relaxing seat. How are you positioned & why? Tell me how i'm wrong (bleeding theta gets 0 marks)

  • Intern in IB-M&A

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