Bonuses for Wall Street’s investment bankers are forecast to jump as much as 35% this year – although experts have warned that payouts could be knocked by stock market volatility and an economic slowdown in the US.

Fresh predictions suggest that staff across a range of financial firms – including hedge funds, asset managers and investment banks – will see payouts rise for the first time in two years. It follows a rebound in business confidence and market activity, with companies more willing to take risks amid easing inflation that has started to translate into lower borrowing costs.

Investment bankers who work in debt underwriting are expected to see the biggest rise, with bonuses forecast to soar 25% to 35%, after a jump in the number of companies and governments issuing investment-grade bonds in the first half of the year.

The total Wall Street bonus pool stood at $33.8bn (£26.5bn) in 2023, representing an average payout of $176,500, according to figures released by the New York state comptroller in March.

Equity underwriters, who help issue fresh company shares, are close behind, with the New York-based pay consultancy Johnson Associates predicting a 20% to 30% rise in bonuses after a jump in stock market listings.

Improving conditions for hedge funds, which have convinced investors to commit more cash, could result in a 5% to 15% rise in bonuses for their own staff. Meanwhile, wealth and asset managers are in line for bonuses worth 5% to 10% more than 2023.

While the consultancy’s data reflects bonus expectations for US bankers, it is very likely to influence payouts for their global counterparts, including European outposts of JP Morgan and Goldman Sachs.

A separate report by Dartmouth Partners, a recruiter for banks, consulting firms and startups, has predicted that London’s investment bankers will rake in bigger bonuses this financial year thanks to a rebound in market activity.

UK bankers are also likely to benefit from a decision to scrap the banker bonus cap, which was introduced by EU authorities in the wake of the financial crisis in order to curb risk taking. The UK’s former Conservative governments decided to abandon those rules, with the move finally approved by regulators in November, opening the door to big bonuses that were previously scrapped at two times a banker’s salary

While the move is unlikely to boost overall pay pools, it could result in higher payouts for some individuals.

Barclays became the first UK-headquartered bank to formally lift the cap this week, telling staff they would now be able to earn bonuses worth as much as 10 times their salary. Major US lenders made similar announcements to their UK staff earlier this year, with Goldman giving hundreds of its highest-earning staff the ability to make 25 times their salaries in bonuses.

However, Johnson Associates warned that payouts could be affected if market and economic conditions falter in the final six months of the year. “Recent market volatility and potential softening of the economy is leading to questions on the momentum going into the second half,” it said.

The comments follow a rollercoaster week for global stock markets. A major sell-off was sparked by fears of a US economic slump and a downturn in the technology sector after underwhelming financial results. The alarm followed an unexpectedly weak US jobs report released last week, as well as the US Federal Reserve’s decision not to make interest rate cuts, prompting critics to accuse the central bank of waiting too long to take action.

But the stock market turmoil turned on Thursday night, with Wall Street posting its best day of trading in almost two years, after data showed a drop in the number of Americans filing new unemployment benefit claims last week.

Whiplash trading could continue over the coming months. Investors are nervously awaiting the results of November’s presidential election, which will pit the former president Donald Trump against the current Democratic party vice-president, Kamala Harris.

“Recent market volatility and potential softening of the economy is leading to questions on the momentum going into the second half,” Johnson Associates said.

However, it added that banks had not yet made any payout decisions over the uncertainty. “A shift in planning has not yet occurred.”