Stocks have gone up and mergers and acquisitions have gone down to start 2019.
While the S&P 500 has risen 18% year-to-date as investors remained hungry for risk, deals haven't exactly followed suit
Global M&A is down 16% year-over-year to start 2019. That's an aggregate deal value, so the value of all deals this year. Volumes have decreased slightly.
Well, many of the risk factors for stocks investors are concerned about have i acted deal-making. "Coming off the strong performance in 2018, geopolitical issues such as the trade tensions with China, interest rate uncertainty and broad market volatility are key factors slowing the pace of deal-making this year," said law firm Hogan Lovells global head of corporate practice, David Gibbons in a note.
Also of note, the corporate tax rate moving down to 21% from 35% in 2018 was a huge boost U.S. deal making. Corporate tie-ups soared in 2018 as companies were eager to put excess cash to work and the economy was accelerating, partly a result of the new tax pan. For 2019, it would have been almost impossible for the same level of deal activity to persist, as companies don't have an added benefit of much lower taxes against 2018.
So how about that second half of 2019? The picture for deals certainly doesn't look alluring for investors, but if the Federal Reserve lower interest rates, which many still except to happen even with a slightly more positive trade outlook, there may be some support level for deal activity.
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