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- No BS. Just Bullish.
No BS. Just Bullish.
Back to School? | Dot Dot Dot
The Wall Street Skinny
August 28, 2024
This Week on The Floor
Jen & Kristen here! We get asked all the time, “do I need an MBA on my resume to succeed on Wall Street?”
We’re answering that question today.
And speaking of resumes, don’t forget to download our FREE resume template optimized for high finance here.
Fed cuts on the horizon…how to read a dot plot?
Should I get an MBA?
Coming up on the economic calendar: USD Growth & Inflation Data; Bank of Canada rate decision; EUR Inflation Data
Markets Recap / Deal News
Interviewing this week? Here’s some content for your conversation.
Jerome Powell, the chairman of the Federal Reserve, clearly signaled last week at Jackson Hole that the time has come for a rate cut in September.
What is often overlooked is the fact that the Fed is not a dictatorship.
Rather, the Federal Open Markets Committee (“FOMC”) makes a joint decision.
And starting in 2012, policymakers began publicly sharing their individual projections quarterly about the expected path of rates via something called the “dot plot”.
Probably not worth a whole podcast episode, but we’ll explain here!
This was introduced to provide more transparency to the markets and keep rate announcements from feeling like a surprise.
Each FOMC member anonymously reports their expectation for where the Fed Funds target rate will be set at the end of a particular year.
Kinda like polling a jury in a trial, the dot plot gives you a sense for a general trend but also shows you holdouts, or outliers on the extremes.
Source: Fidelity.com
Policymakers who lean towards more accommodative policy (aka, lower rates) and are focused more on maximizing employment tend to be categorized as “doves”.
Those who are more focused on controlling inflation and lean towards more restrictive monetary policy (aka, higher rates) are called “hawks”.
Market participants will carefully watch changes in the dot plot from quarter to quarter, looking for shifts in sentiment amongst policymakers.
Remember, this is just one tool for communication used by the Fed.
Fed governors give speeches constantly throughout the year outside of their formal meetings, and economists will dissect every word of those speeches looking for clues as well.
Do I Need an MBA?
Here’s the skinny, at least when it comes to US-based financial firms.
Back in ancient times (read: 10-15 years ago), the MBA was a fairly standard component of many high finance careers.
On the corporate advisory side of an investment bank (“IBD”), it was common to do a 2-year stint as an analyst out of undergrad, then go back to business school before starting the next part of your career.
Many Private Equity firms and Hedge Funds that recruit directly of IBD would also mandate an MBA as part of their talent development process after 2 years.
For those who utilized an MBA to switch from a different industry, banks used to widely recruit for both IBD and Sales & Trading roles at the Associate level from business schools.
Broadly speaking, an MBA was seen as a rite of passage for leveling up within the industry and building a network.
Does an MBA really open the doors of high finance to you?
Times have changed.
First of all, Sales & Trading recruiting out of business school has effectively dropped to zero.
Investment Banking Associate recruiting has shrunk to a fraction of its former scale as well.
Secondly, many buy side firms are now cultivating talent as early as sophomore year in college, and have dropped the MBA as part of their talent development process.
Since so many firms cultivate talent directly from the undergrad pool and train them on the job, spending $150k+ on an MBA (and that’s BEFORE the opportunity cost of foregone salary) may seem pointless.
You spent $200,000 to party for 2 years?
There is still a strong argument to be made for career switchers, who can leverage the MBA to insert themselves into a recruiting cycle.
It’s also hard to put a price tag on building a lifelong network of people who will likely go on to do great things.
However, the value of an MBA for a high finance hopeful from any institution other than one of the top 3-7 business schools has dropped precipitously.
The reality is, most elite financial institutions are not recruiting much beyond the Whartons, Stanfords, and Columbias of the world.
We spoke frankly with an MD at a bulge bracket investment bank, who recalled his experience applying to business school. He applied to Wharton, Harvard, and Dartmouth alone.
When a friend asked him, “where are you applying for a safety school?” he simply replied, “Nowhere.”
This Week in the Markets
If you’re interviewing for a job in any kind of markets-facing or investing-based role, it helps to have a handle on economic data releases.
We will be rolling out a training program helping you learn to read the financial news, starting in September.
Next Monday is Labor Day in the US and Canada