NEW York's powerful securities industry - which was forced to lay off thousands of workers in the mid-to-late 1980s - is back.
Profits are up for the major brokerage houses and expected to get better as the economy improves. Smaller investors have been returning to stocks. Many mutual funds and other investment houses have been inundated with cash, as investors have pulled out of low paying money market funds or certificates of deposit. Trading volume has been healthy. In short, Wall Street has been looking good once again for its thousands of employees.
Even this week's downturn is not expected to immediately arrest securities industry gains. "The securities industry makes money on the downside of the market as well as the upside," says Gene Jay Seagle of Gruntal and Co., an investment house.
Part of the strength of the securities industry stems from the surge in the equities market itself. Until this week's drop, the stock market had been on a roll since Dec. 20, when the Federal Reserve Board cut the discount rate by one point.
The modest revival of the economy in the Northeast, where most brokerage houses are headquartered, may have also encouraged investors. Recent evidence suggests that a rebound in the Northeast region will not lag much behind the rest of the United States, says David Wyss, an economist with DRI/McGraw-Hill, in Lexington, Mass. Signs of recovery, Mr. Wyss says, include stepped-up housing sales and gains for the computer and computer software industries.
Brokerage industry profits and hiring are expected to help offset continuing job losses in the manufacturing sector in the New York area, according to economists for the Port Authority of New Jersey and New York.
"The profitability of [stock market] brokers is great these days," says Lewis Altfest, president of L. J. Altfest & Co., an investment advisory firm. Wall Street's current gains, he says, represent "about the only thing in New York right now that isn't all 'gloom and doom.'"
The rebound of the brokerage houses is running somewhat counter to the regional trend in financial services overall. But experts here say that is not surprising, since so many of the major Wall Street firms are national - with offices throughout the US.
Larry Eckenfelder, Theresa Matacia, and Samuel Brown, who are analysts for Prudential Securities Inc., conclude in a recent study that the "full-line" firms in the brokerage industry should generate earnings during 1992 "in excess of those reported in 1991."
The first quarter is expected to be the high point for the securities industry this year, says Larry Wachtel, a vice president with Prudential Securities. A number of brokerage stocks tumbled in value last week based on concerns about the duration of the bull market.
Earnings gains have been translating into cash bonanzas for many individual brokers. Commissions, the Prudential analysts say, are running 25 percent or more ahead of year-earlier levels. Investment advisory fees (what brokerage firms charge for assets under their own management) are reportedly up.
Salaries on Wall Street are also climbing, just as they were doing before the market crash of October, 1987, when securities houses were forced to make huge layoffs.
Mr. Altfest urges investors to be cautious about the securities market. When short-term rates begin to go back up, he says, Wall Street will "see a movement [of money] back out of the stock market" toward alternative investments.