Wall Street bonus pools are expected to be flat to slightly positive in 2026 as geopolitical turmoil related to the Iran war and instability in the private credit market temper incentive growth, according to compensation consultancy Johnson Associates.
New York State Comptroller Tom DiNapoli estimated in March that total bonuses for Wall Street executives rose 9% to a record $49.2 billion in 2025. Johnson Associates had previously suggested late last year that the 2025 bonus pool would likely be the largest since 2021.
Alan Johnson, founder of Johnson Associates, identified geopolitics as the primary risk to pay pools going forward. "The biggest risk continues to be geopolitics," he said, contrasting last year's tariff concerns with the current year’s outbreak of war.
Diplomatic developments have shown some movement: Iran said on Wednesday it was reviewing a new U.S. proposal, and sources indicated Washington and Tehran were close to agreeing on a one-page memorandum aimed at ending the war in the Gulf while postponing complex issues such as Iran's nuclear program. While such signals may point to the conflict easing, Johnson cautioned that oil prices are likely to remain elevated for an extended period and that inflation will pick up.
Since the Iran war began on February 28, market anxiety around potential supply disruptions has driven oil prices substantially higher. That jump in energy costs has started to filter through into higher fuel and transport prices.
Despite these headwinds, Johnson Associates still expects some pockets of the industry to perform well. Investment banking advisory roles and trading operations are seen as potential leaders in bonus growth, supported by volatility in markets and a resurgence in dealmaking activity.
The consultancy highlighted strong momentum in both mergers and acquisitions and initial public offerings. It projected that advisors to M&A transactions and equity offerings could see upside as high as 20% in their bonuses, reflecting the outsized fees and advisory demand in a busy deal environment.
Across investment and commercial banking more broadly, incentives are projected to increase by as much as 10% on average, driven by revenue gains and a continuation of trading strength.
By contrast, the turmoil in the private credit market has produced fundraising difficulties and reduced returns, which Johnson Associates warned could negatively affect compensation for roles tied to illiquid alternatives. The consultancy said it is projecting bonuses to be lower this year in a range of between 2.5% and 7.5%.
Separately, the average bonus for professionals working in illiquid alternatives is expected to be flat to up 5%, according to the firm. The private credit sector has been stressed by the market downturn, prompting some investors to pull back amid concerns about valuations and lending standards.
Outside of banking, hedge fund executives are forecast to see bonus increases between 2.5% and 10%. Traditional asset managers are likely to record an average bump of about 5%, helped by recovering markets and expanded opportunities through alternative investment partnerships. Wealth management bonuses are also projected to rise roughly 5%, supported by inflows and intensified competition to attract private wealth talent.
Overall, Johnson Associates paints a nuanced picture: while aggregate Wall Street compensation growth for 2026 looks limited by macro and market risks, specific sectors tied to advisory work and trading could outpace the broader market. Conversely, areas linked to illiquid alternatives and private credit may face downward pressure on incentives as fundraising and performance remain challenged.
Key context preserved from the consultancy's assessment:
- 2025 bonuses rose an estimated 9% to $49.2 billion, per New York State Comptroller figures reported in March.
- Geopolitical developments related to the Iran war and the private credit market turmoil are central constraints on 2026 bonus growth.
- Investment and commercial banking, plus advisory and trading businesses, are forecast to fare better than areas exposed to illiquid alternatives.