Takeaways: Well that was quite a quarter. A litany of ‘worst since’ for many global benchmarks, M&A records, a will-they-won’t-they Fed saga plus some spectacular share rollercoaster rides. We’re seeing rising confidence and investment in some areas, a maelstrom of concern in others. Perhaps the reason why we’re seeing such bifurcated views is because the traditional macro picture doesn’t tell the whole story. Time to get a little bit disruptive…
Takeaways: Markets didn’t know quite how to react when the Fed held last week. That’s hardly surprising when messages shift, narratives conflict and seven years of abnormal policy has created a ‘misallocation of capital’. A breakdown in the ‘normal’ relationships between assets and responses to good and bad news is becoming par for the course.
Nevertheless, this week’s blog attempts to unpick the repercussions from the muddle of responses. It feels increasingly like ‘hold’ might be the theme into 2016 – on both sides of the Atlantic – in an increasingly weakening context. Defaults remain low, but growth also remains subdued and the longer this lasts, the more likely we’ll see significant capital transformation in sectors at the coal-face of the ‘new normal’ – like oil.
Takeaways: Volatility, growth worries….what of them! Deal making surpassed 2007 figures in August regardless – or should that be ‘because of’ these concerns? While we all wait on the Fed, it seems like an opportune time to cast our eyes around the deal landscape, because there’s certainly plenty to ponder. Deal dynamics are very different to 2007, not just in financing, but also in motivation. That should give this run of deal making legs beyond the first rise in US interest rates – barring market paralysis – but can this pace be maintained?
Takeways: This week we’re bringing you a ‘back to school’ edition of the blog – although, judging from this summer’s level of activity, it doesn’t look like many of you spent that much time away from your desk. Nevertheless, we thought it would be a good time to put together our thoughts on what the rest of 2015 might bring – and give you a sneak preview here. There is obviously a slight risk in putting our thoughts down now, since last week’s US non-farm payroll numbers brought us no closer to knowing when the Fed’s will move and China’s next moves obviously remain the other unknown in global equations. But, if we wait for certainty, we’ll be waiting a while – which neatly sums up were we are. Volatility reigns – although, that isn’t the only story….
Takeaways: So much for the summer break! Deal frenzy, spectacular market dives and the odd rebound. In modern sporting parlance, we can take the positives: earnings resilience, US recovery and a continuing M&A boom. However, it’s hard to escape the shift in mood. The last month has highlighted (again) how much market confidence is still based on the support of central banks and a strong Chinese growth narrative. What’s different is that China looks like more of an enigma than ever, whilst central banks appear to hold less of a whip hand over markets – and the biggest look set to take their stabilisers away.
Whilst we wait to see if the global economy can pedal fast enough to regain equilibrium, companies can expect a wobbly period of uncertainty feeding into contract delays with demand, currency and price fluctuations that will throw up winners as well as losers.
Takeaways: Last week’s engineered fall in the Renminbi was actually pretty modest, certainly in the context of the currency’s recent appreciation. More significant is what the move signalled – or more pertinently the market interpretation of those signals in the context of the un-virtuous circle of weak Chinese demand, falling commodities prices, a stronger dollar and increasingly stressed ‘emerging markets’. It’s a fragile situation that shouldn’t stall markets, but will make them more discerning as we move into pivotal month.
Takeaways: M&A activity usually winds down in summer, but July brought another US$500b+ of deals and August has started in the same vein. Why so active? In low growth markets, M&A – or more precisely a robust approach to capital allocation – is looking like one of the best ways for companies to outperform their peers. In this context, uncertainty in China (& elsewhere) and poor earnings are deal incentives. The Fed’s potential move in September provides a further hurry up…although in this we find a caveat. Debt markets are already beginning to look less accommodating. Not too much at investment grade, but more so lower down the scale. Plenty to reasons still to do deals; but will there be enough fuel to continue this record breaking momentum?