Wall Street's best business is cratering
The equities business, which had a stellar year in 2015, has gotten off to a lousy start this year.
Stock markets have taken a hammering, putting a hole in trading revenues and forcing a pause in initial public offerings.
It isn't that there's no trading taking place. Trading volumes on stock exchanges have held up relatively well, according to analysts.
The problem is that the trading that has been going on has not been "healthy," according to executives and analysts.
That is to say it is choppy, and not generating the revenues that a more stable, rising market would. JPMorgan analyst Kian Abouhossein is expecting equities revenues to drop 16% this year.
"Although Equity market volumes have held up relatively well, the decline in Equity markets means the volumes are not healthy," he said in a note.
His comments echo those of Ted Pick, the global head of trading at Morgan Stanley, who last week put Wall Street on alert that choppy markets had likely dented trading revenues.
Pick said then that while trading volumes are up, it isn't the right kind of volume.
"I think we'd all argue that some of this volume isn't terribly healthy," he said.
"It is not the classic beginning of the year reinvesting cycle," he added. "It is choppier, it is gappy, it is highly insured volume, and the question is how long are we going to see that for?"
Initial public offerings and other stock sales have all but dried up for now.
Just $436 million has been raised via IPOs on US exchanges so far this year, according to Dealogic. That is down more than 90% from the same point last year, when $4.6 billion was raised.
Total equity capital markets activity, which also includes stock sales by companies already listed, stands at $16.3 billion. That is down from $30.5 billion.
That means it isn't looking good for anyone on Wall Street focused on equities, whether they're traders or bankers.