The New York Times
How Will Wall Street Weather the Storm?
January 18, 2008, 10:42 am

The financial carnage isn’t over yet. The Federal Reserve chairman, Ben S. Bernanke, may not use the “R” word, but more and more analysts and investors are. For Wall Street firms recovering from last year’s huge losses, that means there may be even fewer sources of new business to give earnings a much-needed boost in 2008.

So how will financial firms make up the difference? Aleksandrs Rozens of Investment Dealers’ Digest has rounded up a few ideas. Mr. Rozens questioned an array of financial experts to get the lay of the land for Wall Street’s business prospects in 2008.

Some predictions sound hauntingly familiar: Banks will look to sovereign wealth funds for infusions of capital, while the megamergers of yesteryear will be replaced by smaller deals among middle-market companies.

Other trends to look out for: larger firms such as Morgan Stanley, JPMorgan Chase and Goldman Sachs may expand further into markets outside the United States. Meanwhile, layoffs on the home front are generally considered a good bet.

And if consumer spending declines — as it usually does in hard economic times — corporate restructurings within the retail sector could prove to be a healthy source of advisory work. In addition, some predicted that financial firms’ fees from commodities trades, which should stay active given the high prices of oil and precious metals, will most likely increase.

Mr. Rozens’s story, published Monday, came before Citigroup and Merrill Lynch announced their gaping fourth-quarter losses. But the gist of the story is unchanged: Wall Street firms have a tough year ahead.