Make market turmoil your secret weapon

There’s a memorable scene about two-thirds into Hayao Miyazaki’s 2001 anime masterpiece Spirited Away, where young protagonist Chihiro finds herself aboard a train gliding over water and sitting silently alongside the enigmatic No-Face. This two-minute oasis of calm follows a dizzying whirlwind of bathhouse escapes and supernatural mayhem. It’s a serene pause, a slice of Zen, amid the rollercoaster of life-or-death drama.

This marvellous scene leapt to mind with the recent market turmoil starting in Japan and rippling out to the rest of the world. Just when we thought the markets had regained their sea legs, a surge in the yen tossed investors overboard. Suddenly, the financial seas were churning with panicked traders unwinding carry trades, liquidating positions, and furiously calling in collateral. Every financial media outlet now has its own doomsayer, crying out like a modern-day Cassandra.

For investment bankers, this is as welcome as a surprise plunge in an ice bath (an anagram of its opposite, a nice bath). After two rough years and hiccups like France’s snap parliamentary elections, 2024 was finally shaping up. Optimism was creeping back, and Jeffries CEO Rich Handler had just tweeted: “The IPO market is now OPEN.”

But now? Not so much. With the yen bouncing back, the US economy slowing, AI investments being second-guessed, and Middle East tensions escalating, it seems the sun has just ducked behind a cloud.

So what can beleaguered bankers do when the markets throw a tantrum?

First, control what you can. The markets are like a wild stallion — untameable and utterly unpredictable. Lucky charms and rain dances won’t do any good here. If the volatility clogs up your pipeline, that’s a well-known occupational hazard. Investment bankers must adapt and persevere.

Like the best investors, the most enterprising bankers espy opportunities among the rubble of dashed hopes and the debris of shattered dreams. In turbulent times, clients are eager to hear from you. When the sailing is smooth, they can ignore your calls and your advice.

But when their business is teetering, their unvested stock is losing value and their borrowing costs are spiralling, your words are golden. Bankers become financial therapists, calming anxious corporate and sponsors. This is a prime time to solidify relationships, not by pitching but by listening, empathising and reassuring.

Remember also that the situation can flip on a dime. Short-covering rallies can be as intensely violent as panic-selling capitulations. You need to be ready for the rebound — it won’t be heralded by trumpets.

And after a brutal market drop, even the most cautious clients are itching to pounce if conditions improve. Laggards turn into brazen opportunists in times like these. This calls for alertness and sharp tactics, giving your team a sense of purpose and direction. There’s no excuse for lethargy just because deals might be postponed.

Another key constituency to manage is the senior management at your bank. You have to go into overdrive with market updates, client updates, pitch updates and the like for the overlords upstairs.

Prepare new target lists; senior management will welcome a menu of actionable items. They may be sitting on Mount Olympus but they will feel exposed at those high altitudes: the air is thinner and the weather more changeable. You need to be realistic about future activity — neither cheerily optimistic nor bleakly grim — but there always must be a glimmer of hope. And words matter: clients are postponing deals, not cancelling them; putting projects on hold, not yanking them. The narrative is simple: you’re poised to launch offerings and close deals as soon as things calm down. The pipeline is merely deferred, not abandoned; resting, not dead.

In addition, bankers will need to be in constant dialogue with their internal risk colleagues, whether on the credit or trading side, depending on the nature of their business.

Here the tone of the conversation will be very different. No banker can give comfort and solace to risk managers about the markets. The risk teams can see what is happening with their positions, and they are under a lot of pressure. Happy talk will cut no ice with them and will only irritate them.

But bankers need to know what they can and can’t promise to clients, requiring a real-time understanding of what the risk appetite is within the organisation. And they must also convey seriousness and sobriety because if the risk team senses a lack of gravity from the client-facing side, it will block or turn down future requests for balance sheet.

And then there are the juniors. You need to keep them busy. Not with a 120-hour working week — that’s counterproductive and wrong on so many levels. But when people aren’t busy enough, distractions and worries creep in.

That’s yet another reason to push forward with projects and maintain an active client calling effort. It might seem nice to tell the juniors they can go home early but you’re not doing them or yourself any favours.

So when the financial winds start howling, don’t let your nerve falter or your morale slip. Embrace the chaos and turn it into your secret weapon. Remember that the world of finance, much like the spirit world of Spirited Away, is unpredictable and filled with strange creatures — some friendly, some not so much.

As you navigate the storm, keep cool and stay grounded. Your role as a banker is not just about closing deals; it’s about being the rock for your clients and your team, the beacon of stability in rough seas, the North Star on a dark night. Offer your considered views and be ready to seize opportunities when they arise, as they surely will.

In the end, as Chihiro discovered, it’s about perseverance and adaptability. Whether in the spirit world or the world of finance, those who confront challenges with grace and tenacity will emerge stronger, ready to face whatever comes next.

If Chihiro could find stillness and hope in a chaotic spirit world — even after her parents are transformed into pigs — then surely investment bankers can find their footing in this financial tempest.