More M&A activity. Corporate deal activity has been on the rise in recent weeks. In a world of relatively slow growth, and fewer opportunities for organic growth, it’s no surprise that companies are willing to deploy cash – and in some cases rich stock valuations – to buy growth. The willingness to engage in mergers and acquisitions may also be a precursor to rising capital spending.
So what does this mean for investors? Low rates should support equity valuations and help keep long–term Treasury rates from rising too aggressively. In addition, higher levels of deal activity and higher capital spending levels also tend to act as tailwinds for equity markets. You can read more about my economic outlook in my latest Investment Directions monthly market commentary.
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.
Source: Bloomberg, BlackRock research