The Reeducation of Young Bankers

Life on Wall Street has been so smooth for Drew Pettit’s generation that the 33-year-old Citigroup Inc. strategist decided to study financial pain. He started reading “the most bearish, miserable set of books I could potentially find.”

He and colleagues whose careers began after the 2008 financial crisis benefited from a stretch when money was what Pettit calls “cheap, easy, fast.” Even when the pandemic sent markets reeling three years ago, Wall Street quickly rebounded, fueled by government help. Pettit says he and his younger colleagues “don’t have a sense for what a bad business environment looks like.”

They’re about to find out. Young bankers are bracing for the first sustained sourness of their careers, with strategists forecasting a recession, if not one of the worst years for the world economy in four decades. The era of free money is gone, with interest rates marching upward to 5% and beyond, thanks to the Federal Reserve’s d o g ge d c a m p a i g n against inflation. After a run of trillion-dollar profits for the biggest banks over the last decade, the new conditions could deliver countless layoffs, slumping deals, choppier markets and grim expectations. “It’s absolutely the first time many of us are seeing a corrective environment like this,” says Jeff Bjorkman, a vice president in Lazard’s capital markets business who started there in 2016. While he and his cohort experienced the pandemic volatility of early 2020, “this shift feels much more durable and likely prolonged.”