Wall Street is finding the silver lining on inflation, but how long will the 'good' times last?

Hi! Dan DeFrancesco in NYC, and I have to imagine there are better ways to bring your family together than faking your own death.

Today, we’ve got stories on the new generation of founders in the wake of the tech layoffs, why Goldman Sachs is probably not pumped about Twitter skipping rent payments, and what NOT to wear.

But first, I’ve got a new trading strategy.

Title inflation is hurting employees and companies

Malte Mueller/Getty Images

1. Inflated expectations.

Inflation has wreaked havoc on American households as the cost of goods has outpaced wage growth over the past two years. But on Wall Street, a crisis is just a bit of financial engineering away from becoming an opportunity to make money.

That’s where inflation traders come in. The strategy of betting on the swings in consumer prices has exploded in recent years, with revenues from inflation trading going from $700 million in 2019 to $3.9 billion in 2022. 

That kind of spike is bound to turn heads. As a result, banks and hedge funds have scrambled to hire traders with experience in the space to get in on the action, Insider’s Kaja Whitehouse reports.

Kaja has a full breakdown of the inflation trader merry-go-round, mapping out more than a dozen traders who have been poached or promoted recently. 

I understand the push to get into a red-hot market, but I can’t help but wonder if finance firms have already missed the boat on this one.

The Bureau of Labor Statistics’ May report indicated the Consumer Price Index is coming back down to earth. And for the first time in two years, pay raises actually caught up to inflation. Further driving home the point was the Federal Reserve’s decision to pause interest rate hikes after 10 consecutive bumps.

All of that is to say that inflation (hopefully) might not be sticking around. 

But that also begs the question: What are banks going to do with all these high-priced traders?

As Kaja has previously reported, they don’t come cheap. Some traders have been offered guaranteed pay of up to eight figures a year. And while inflation trading has the potential to generate some big returns, making your money back on hires like these might be a tall task if inflation has a short shelf life. 

It’s tough not to draw comparisons to the rise and fall of the index-rebalance trade, which went from one of the hottest strategies on the Street to somewhat of an afterthought. 

More on where the top players in inflation trading are landing amid a heated war for talent.

In other news:

Ben Stiller and Owen Wilson in “Zoolander 2.”


2. BlackRock just set a high bar for its private markets business. The giant money manager wants to double its revenue in the space over the next five years, and plans on scooping up other firms to do it. Why BlackRock is on the hunt for deals.

3. Layoffs fueling the next big thing. Tech employees who lost their jobs in the wave of cutbacks are starting there own companies. More on the new-age founders.

4. Things are not looking so good for China’s economy. There were plenty of expectations for this being a big year for China, but things have not gone according to plan. Why China’s in a lot more trouble than anyone thought.  

5. One victim of Elon Musk not paying rent on Twitter’s offices: Goldman Sachs. The bank was among the lenders that originated the $1.7 billion loan to the owner of several of Twitter’s offices. Here’s how Goldman is feeling the heat from Musk’s decision.

6. The housing market continues to be an absolute dumpster fire. Nobody seems to want to put their house on the market because they are locked in at a low rate. That means the houses that are for sale will probably sell for a premium since the inventory is so low. And even if you don’t buy a house you could still get screwed by someone taking out a mortgage in your name. What fun!

7. Citadel’s Ken Griffin sounds off on the US economy and China. The billionaire hedge fund manager isn’t optimistic that the US can avoid a recession, but he is still feeling bullish on China. Here’s what he said.

8. Some career advice from Uber’s CEO. Dara Khosrowshahi said people spend too much time trying to establish a plan for their career early on. Here’s why it’s better to have an open mind and go with the flow.

9. Read this before getting dressed this morning. We spoke to stylists about the most common mistakes people make with their wardrobe. Here are 13 fashion no-nos.

10. How to stay cool on a budget. Temperatures are on the rise, but that doesn’t mean your electricity bill needs to follow suit. A couple of scientists explained simple but effective ways to fight off the heat. Stay frosty.

Curated by Dan DeFrancesco in New York. Feedback or tips? Email ddefrancesco@insider.com, tweet @dandefrancesco, or connect on LinkedIn. Edited by Jeffrey Cane (tweet @jeffrey_cane) in New York and Nathan Rennolds (tweet @ncrennolds) in London.