Wall Street’s most important business is having a bumper start to the year.
Fixed income, currency and commodities (FICC) revenues are set to increase 34% in the first quarter from a year ago thanks to rising trading volumes, according to JPMorgan analyst Kian Abouhossein.
Abouhossein wrote in a note to clients that credit trading businesses have likely done well as a result of increased trading and so-called inventory gains. These are where the positions on a bank’s books increase in value.
He added that the rates business is also expected to do well thanks to increased government bond issuance, rising inflation expectations, and uncertainty over the path of interest rates.
The equities business, in contrast, is forecast to see a contraction in revenues in the first quarter.
The strong rebound is in part a result of a weak first quarter for many banks in 2016. However, over the longer term JPMorgan is forecasting a 3% increase for full-year 2017 FICC revenues, and a 1% decrease in equities revenues.
That means that 2017 is likely to represent a continuation of the trend established in 2016, with the fixed income business rebounding and equities revenues falling after several years of growth.
Business Insider sat down with Daniel Pinto, the head of JPMorgan’s corporate and investment bank, late last year about the rebound in fixed income revenues. He said then that “there are plenty of things” that could create a positive environment for trading volumes, from “pro-growth policies” to “more action from the Fed,” which will create opportunities for traders.
“Whatever policies the US takes on trade and globalization, it will have an influence on what does or doesn’t happen in emerging markets. You have plenty of events taking place in Europe. You have a new government in Italy, elections in France and Germany. You have the initiation of the Brexit process,” he said.