Jesika Baranyai
At Yorkville, we pay particular attention to the M&A landscape as it has implications for how we allocate capital in the public markets. For example, if one of the companies we own is the target of a takeover, it will typically drive the stock price materially higher. While searching for potential “targets” is not part of our core investment thesis, it can nonetheless be a byproduct of our investment process as we tend to invest in durable, fundamentally strong businesses that can trade at discounts to their intrinsic value. The past few years have been particularly slow for the M&A world as rising interest rates and relatively modest valuations have tempered activity. Against that backdrop, in this article we will explore the current M&A market environment and recent uptick in activity to highlight some of the key implications and how we are positioning our portfolios accordingly.
Markets continued to march higher in September, thanks in large part to the US Federal Reserve's somewhat surprise announcement of a 50 basis point rate cut during the month. While markets were pricing in a chance of this larger cut, the news nonetheless was a catalyst to drive equity markets higher and end the month firmly in positive territory. We also saw China step in and provide some respite for their struggling economy by also cutting rates by 50 basis points and reducing bank reserve requirements. This ignited a strong multi-day rally in Chinese equity markets that trickled into the broader global markets, albeit much more modestly, during the latter part of September.
August introduced some more significant volatility to markets that hadn’t been seen recently, with asset prices whipsawing from steep drops at the beginning of August to modest gains by the end of the month. Early volatility was driven by a weak US jobs report increasing the likelihood of larger rate cuts and an unwinding of the Yen carry trade, which involved large market participants selling to cover short-term losses. The Bank of Japan stepped in quickly to reassure markets that they would not raise rates during market volatility, reversing some of the losses from the prior days. As markets normalized, we saw a slow recovery in major market indices for the remainder of August. Over the latter part of the month, additional economic data came in more positive and provided further relief to market participants. CLICK HERE
In July, investors decided to switch from high-growth sectors to more defensive ones. That move was influenced by some strong consumer data and positive GDP figures in the US and Eurozone. The US and Canadian markets both saw great sales and earnings growth, with the S&P/TSX Index having its best month of the year. Even though there was some mixed performance with currencies and commodities, the overall outlook seems positive thanks to robust economic indicators and corporate earnings. However, people are still being cautious about potential interest rate changes and market volatility.
Starting in January 2024, attacks on ships by Houthis in Yemen have caused shipping routes between Asia and Europe to bypass the Red Sea/Suez Canal, increasing transit times and fuel costs by 40% and driving up shipping rates. As happened previously in 2021, a rise in shipping rates is expected to contribute to a bump in inflation data, although the impact may not be evident until after the November election. CLICK HERE
Yorkville Asset Management Inc. is pleased to announce a special distribution of the Yorkville Health Care Fund issued on July 22, 2024.. CLICK HERE to read the full release.
President Biden announced he would not seek re-election, endorsing VP Kamala Harris as his successor, which had little impact on market sentiment as seen by the muted market reaction. Despite this announcement, betting markets show Trump's odds for winning the 2024 Presidential Election remain largely unchanged.
Yorkville Asset Management Inc. announced the successful financing and renewal of $476 million across multiple credit facilities to support its Long Term Care (LTC) portfolio.
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