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Global economies resilient, capital markets issuance to rebound

Global economies have proved more resilient than first anticipated heading into 2023, particularly in the face of the U.S. banking liquidity crunch, but investors are still waiting to see how economies and markets digest a higher-for-longer interest rate environment before becoming more supportive of new deal activity, according to a new S&P Global Market Intelligence report released today. The newly published, 2024 Capital Markets Outlook: Issuance looks to rebound despite notably higher rates, is part of S&P Global Market Intelligence’s Big Picture 2024 Outlook Report series.

In the new report, S&P Global Market Intelligence’s financial institution research analysts highlighted that corporates maintained access to debt markets in 2023 despite significant interest rate increases and the U.S. banking sector’s liquidity crunch during the spring, but equity issuance has plummeted. Market volatility could ease and investor support for new transactions could grow as inflation declines and the Federal Reserve ends its rate-hike cycle, provided that economic conditions continue to hold up in a higher-for-longer interest rate environment. If economic strength persists in the face of uncertainty and the Fed can end its tightening cycle soon, animal spirits in the capital markets could grow, leading to a resurgence in issuance activity.

“While equity issuance activity has been abysmal, the debt markets have remained open despite considerably higher interest rates and macroeconomic uncertainty,” said Nathan Stovall, Director of Financial Institutions Research at S&P Global Market Intelligence. “There are some signs of life in the U.S. IPO market and future activity could look even more promising as the Fed nears the end of its rate hike cycle, but investors are not fully waving the green flag yet, with the economic outlook for 2024 remaining patchy for most major economies, including the U.S.”

CT Bureau

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