Although the pandemic has put numerous economies into a state of dystopia, global capital markets have been thriving more than ever. Since the beginning of the pandemic back in March, global monetary authorities have bought $1.3 billion worth of assets every hour, while adapting new policies that embolden the nationalization of bond markets in Europe, Japan, and the US via yield curve control.
Indeed, with the aid of monetary authorities providing a safety net in credit, debt, and equity markets, it was certainly not difficult for a large firm to conduct a debt or equity transaction. As a result, investment banks around the globe have been able to generate a record total $124.5 billion in fees this year, as desperate companies decimated by the pandemic raised cash in order to survive.
According to Financial Times, 2020 turned out to be a significant year for many companies, as they were able to raise over $5 trillion in debt markets. Undoubtedly, with such copious amounts of money being raised, lenders were in turn able to collect exuberant fees; investment banks earned approximately $42.9 billion in underwriting debt deals, which amounts to a 25% increase compared to the year prior. Meanwhile, fees associated with the underwriting of initial public offerings surged by 90% to $13 billion – a level not seen since the end of the Dot Com bubble in 2000.
As the Financial Times points out, major US banks including Goldman Sachs, Morgan Stanley, JPMorgan, Citigroup, and Bank of America have collectively gained over $37 billion worth of investment banking fees this year alone, amounting to some of the largest gains in over ten years.
However, despite the astronomical money printing and equal support of capital markets, the economic rebound is increasingly beginning to make an evident case for a “K-shaped” recovery. Where the rich get even richer, while the middle class dissipates into the abyss along with its pity $600 stimulus checks.
Information for this briefing was found via the Financial Times. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.