Coronavirus Updates: Remote Internships, Full-Time Offers, and Looming Market Meltdowns
About a month has now passed since my initial article about the coronavirus creating the risk of canceled summer internships.
As I publish this on April 15, 2020, many firms have announced their internship plans:
- Canceled Internships: HSBC (some internships in Asia), Santander (CIB in only certain locations? Unclear), and various companies in the hospitality, entertainment, and travel sectors, such as Disney. Even some tech companies with high exposure to those sectors (Yelp, Indeed, Glassdoor, etc.) have canceled internships.
- Delayed Internships: Goldman Sachs, Morgan Stanley, and JP Morgan have delayed their start dates to July 6 and shortened the internships while offering full pay.
- Remote Internships: Fidelity, Ernst & Young, Boeing (!), and various tech companies (Intel, Twitter, Amazon, Microsoft, etc.) have made their internships “virtual.” Some prop trading firms also fall into this category, and Morgan Stanley will make “most of” its programs virtual.
- All Interns Automatically Get Full-Time Return Offers + Shortened Internships: Citi (in some locations) and Moelis. Both also shortened their internships while promising full pay. Outside of banking, PwC has done the same thing with a 2-week “digital upscaling” experience.
- Status Quo, Internships Proceeding As Planned: RBC, Evercore, and… any other bank that has not yet announced specific plans?
I am surprised that more firms have not outright canceled internships, and I’m also surprised that some tech companies have canceled their internships.
But I’m not sure that these announcements are “good news,” unless you happen to be interning at Citi or Moelis:
The Impact of All These Changes
The problem is that if a few firms guarantee full-time offers, but others do not, you are screwed if you don’t receive a full-time return offer from your internship.
Even in normal times, it’s difficult to switch banks via “accelerated recruiting,” but this year, it might be virtually impossible:
- Citi and Moelis will not be hiring anyone else, at least not in major financial centers.
- And the other banks will not be hiring much outside of their intern classes.
- Even outside of IB, “general economic uncertainty” means that full-time hiring will be down.
Politicians and activists have been complaining about income and wealth inequality, and now they can add “internship inequality” to that list.
How Do You Succeed in “Remote Internships”?
If you have an internship that is still going to proceed in-person – for now – you can follow this site’s guide to investment banking internships.
But if your internship is now “virtual” or “remote,” what does that mean?
No one knows, but based on accounts from students who have completed “virtual spring weeks” in Europe, my guess is that remote internships will be a mix of:
- Training and presentations delivered by bankers, along with Q&A or “video networking.”
- Some simple work tasks, such as looking up information for comparable company analysis, profiling companies, and fixing/completing presentation slides.
- And they might not even give you real deals or clients but may instead offer you “simulations” based on past transactions or hypothetical ones.
In other words, you should expect even less “real work” than usual.
That’s especially the case if your internship is shortened from 8-10 weeks to 4-5 weeks.
One month is not enough time to get up to speed on a live deal, learn where to find all the information and process details, and then contribute substantially.
Also, deal activity will still be muted even by the summer, so there may not be much to do.
Without in-person interactions, issues such as office politics, speaking ability, appearance/cleanliness, and “the airport test” won’t factor into full-time offer decisions.
Instead, decisions will be based mostly on your work product.
So, if you’re doing an IB or PE internship, you better know Excel and PowerPoint like the back of your hand.
If you’re interning at a quant fund, the same applies to statistics/math/programming.
And if you’re interning in corporate finance, Excel and accounting are still essential, but it’s also good to learn tools that can automate the reporting process, such as VBA, SQL, or Python.
You should not expect much handholding or training because finance firms are quite bad at training in a standard environment, and they’ll be even worse with remote internships.
For more tips, see our coverage of how to prepare for IB summer internships in less than 8 hours, most of which still applies to remote internships.
Yes, a month ago, I was skeptical that banks would move to remote internships, but they haven’t quite done that: they’ve mostly simplified and shortened internships while also removing the in-office component.
Remote Internships and Full-Time Return Offers
Banks will likely lean toward one extreme or the other with full-time offers: many more interns than usual will receive them, or many fewer interns than usual will receive them.
Winning a full-time return offer is already a bit arbitrary, and it will become even more so this year.
Your return offer status will likely be based on:
- Did you do a decent job with the work and avoid major screw-ups? Were you highly responsive to emails and phone calls?
- How are the economy, markets, and deal activity trending by the end of the summer?
If the markets and deal activity are not looking so good, banks will be in “fewer interns than normal receive offers” mode.
Some people have suggested that GS, MS, and JPM will follow in the steps of Citi and Moelis and award full-time offers to all interns, but I think this is unlikely.
These three banks always hire more interns than they plan to retain for full-time roles, so unless there’s a big uptick in deal activity, I don’t see how the math works.
What Do You Do in This Recruiting Environment?
First and foremost, win the full-time return offer – and don’t even think about trying to switch banks.
To do that, focus more on the work product and less on the “socializing” / “making bankers like you” aspect.
Yes, you could still set up quick calls before you start, but it might not even be useful unless you’re already assigned to a specific group.
If you do not win a full-time return offer, then you’ll have to look at regional offices and smaller banks that are more likely to have had sub-par interns. See the article on last-minute IB recruiting for more on this one.
However, even regional offices may not be hiring much if deal activity is down by 50%.
All lateral hiring is also on hold for now, so you’ll have to wait and see if deal activity resumes anytime soon.
In the best case, there might be a pickup toward the end of the summer; in the worst case, hiring might remain muted until sometime in 2021.
Market and Economic Updates
I’ve also fielded some questions over the past week about my initial predictions:
- 50-100 million deaths worldwide.
- A move away from globalization and toward closed borders, lower margins, higher cash balances, and remote work.
- Massive changes to the U.S. healthcare system and general political unrest/upheaval.
- Negative global GDP growth, a 5-10% contraction in the U.S., and a 50-70% decline in the S&P 500, with 30-50% drops in other equity markets.
I’ll take this opportunity to reaffirm these predictions and add several more.
“But wait,” you say, “things are improving! Many countries have ‘flattened the curve’! Hospitalizations in the U.S. have been below model predictions in many places!”
Yes, but this is a case where the cure might be worse than the disease.
Have you considered the number of unemployed and underemployed people worldwide, and the number of small businesses that have shut down?
Most people are forecasting the fatalities like this:
Fatalities = Population * % Infected * Case Fatality Rate
But you need to add several terms to the formula to factor in second and third-order effects:
Fatalities = Population * % Infected * Case Fatality Rate + Population * % Newly Unemployed * (% Suicides + % Starvations + % Murdered + % Drug Overdoses…)
I could keep going, but you get the idea.
You can check this prediction in a few years by looking at the average annual all-cause deaths worldwide over the past 5-10 years.
Between 50 and 60 million people worldwide die each year, so if all-cause deaths increase to more like ~100 million over the next 12 months, this prediction will be directionally correct.
(For reference, 70-85 million died in World War II, mostly in China and the Soviet Union.)
Even when (if?) the virus outbreak is over, companies – especially small businesses – cannot just flip the “on” switch:
- Re-hiring employees will take time, and everyone will be acting cautiously when giving and accepting job offers.
- Consumer behavior will change, and fewer people will be eating out, attending live events, shopping in-person, etc.
- Most companies have nowhere near enough cash to last for months of no revenue, even with loans and government aid.
The S&P Has Recovered A Bit! We’re in the Clear, Right?
Nope, I don’t think so.
Yes, the Fed has effectively killed capitalism and socialized the markets by promising to buy virtually every asset, short of stocks. They’ve even back-stopped junk-bond ETFs!
The problem is that none of that makes an impact on the “real economy.”
Yes, central banks will prop up hedge fund managers, executives, and institutional investors, but these activities will make no difference to ordinary people who lose their jobs.
Most companies haven’t even reported Q1 earnings yet, and the ones that have, have had disastrous results (see: BAML, JPM, and Wells Fargo).
The S&P 500 is more expensive now than it was before the crisis started because forward earnings have dropped significantly.
Oh, and more thing: the main source of returns in U.S. equities over the past ~5 years has been corporate stock buybacks:
But dozens of companies have announced cuts or suspensions of stock buybacks, so who will drive up stock prices now?
Newly unemployed individuals with little in savings? Come on.
Personally, I’m waiting for the S&P to drop to 1,500.
Bear markets do not end with a trailing P/E multiple of 20x+; something in the 10-12x range is more likely:
So, What Happens Next with Remote Internships, Hiring, and the Economy?
- Bank Internship Statuses: GS, MS, and JPM have delayed and shortened their summer internships, other companies have made them remote, and Citi and Moelis have given all interns full-time offers; some tech companies and non-BB/EB banks have outright canceled internships.
- Remote Internships: Expect little “real work,” especially if your internship is shortened, and focus on the work product to win a return offer. Interns who respond to emails the most quickly will have an advantage, and “not screwing up” matters far more than advanced technical knowledge or schmoozing.
- No Return Offer: If you don’t win a full-time return offer, you’ll have to consider an MSF program or another job that is less tied to deal activity, such as audit or corporate finance. Return offer rates could go either way, and they’re mostly dependent on the state of the economy by the end of the summer.
- Markets/Economy: I have become more pessimistic about a quick recovery. The virus might be less dangerous than initially thought, but the “cure” is even more deadly. The stock market is even more overpriced, and Q1 and Q2 earnings will be disastrous. So, I think prices will edge much lower unless the Fed starts buying stocks directly.
In my mind, the main question about all these events is not “if” but “when.”
Hopefully, the answer is “there’s light at the end of the tunnel by the end of the summer,” or there will be a lot of disappointed interns out there…
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