Capital Markets Reopening After the Fed Pivot

Apollo Chief Economist

For two years, the Fed was saying, “Interest rates are going higher.”

That message resulted in very little activity in capital markets, with low levels of IPO, M&A, sponsor-to-sponsor deals, or sponsor-to-strategic deals.

This changed at the December 2023 meeting when the Fed said, “Interest rates are now going lower.”

The impact of this signal change from the FOMC was profound. It triggered a significant rally in the S&P 500 and in IG, HY, and loans. As a result, capital markets reopened and LBO financings have rebounded significantly since December, see chart below.

With the Fed still saying that the next move in rates is lower, we should expect the rebound to continue.

LBO financings coming back after the December Fed pivot
Source: PitchBook LCD, Apollo Chief Economist. Note: Private credit count is based on transactions covered by LCD News.

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