NEW YORK, May 7 (Reuters) - Wall Street bonuses are likely to be flat to slightly positive in 2026, as geopolitical tensions due to the Iran war and the private credit turmoil could slow the economy and incentives, compensation consultancy Johnson Associates said.
Overall bonuses for Wall Street executives jumped 9% to a record $49.2 billion in 2025, according to an estimate from New York State Comptroller Tom DiNapoli in March.
Johnson Associates had estimated late last year that the 2025 bonus pool would be probably the highest since 2021.
"The biggest risk continues to be geopolitics," said the consultancy's founder, Alan Johnson." Last year we had the tariffs, this year we got the war."
Iran said on Wednesday it was reviewing a new U.S. proposal, after sources said Washington and Tehran were closing in on a one-page memorandum to end the war in the Gulf while leaving tricky issues such as Iran's nuclear program for later.
This signals the war may be winding down, but Johnson cautioned the price of oil is expected to remain high for a while inflation will pick up.
Since the Iran war began on February 28, fears of supply disruption have pushed oil prices sharply higher, with the surge in energy costs feeding into fuel and transport prices.
The consultancy said investment and commercial banking could still outperform, as traders profit from bets on volatile markets, and there is strong momentum in mergers and acquisition, and initial public offerings (IPOs).
"The two leaders are going to be - the advisory business, and trading," Johnson said, citing strong growth in both IPOs and M&A.
Advisors to M&A deals and share offerings may have up to 20% higher bonuses, the consultancy said.
On average, incentives at investment and commercial banks are projected to increase up to 10% as revenues soars and trading continues to surge.
The turmoil in the private credit market has created fundraising challenges and lower returns, which could hurt incentives for what it called illiquid alternatives, the consultancy said. It is projecting bonuses to be lower this year, between 2.5% and 7.5%. The average bonus for illiquid alternatives professionals is expected to be flat to up 5%.
Private credit firms have been under stress because of the market's recent downturn, with some investors retreating from these investments due to worries about valuations and lending standards.
Hedge fund executives are estimated to see bonus increases of 2.5% to 10%, while traditional asset managers will likely get bumps of 5%, helped by recovering markets and new opportunities through alternative investment partnerships.
Wealth management bonuses will be up 5%, helped by inflows and heightened competition for private wealth talent, Johnson Associates said.
Reporting by Saeed Azhar; Editing by Tatiana Bautzer and Nick Zieminski
