The week in review
- Retail sales were flat in June but rose 0.4% m/m ex-autos
- Industrial production rose 0.6% m/m
- Initial jobless claims jumped to 243K from 223K
The week ahead
- 2Q GDP (first estimate)
- Markit PMIs
- PCE
Thought of the Week
Like 2022, 2023 was a stagnant year for private equity (PE). Against a backdrop of higher interest rates and economic uncertainty, PE exit activity slowed as buyers and sellers struggled to find common ground on valuations. However, recent data suggest that the worst of the exit activity slump may be behind us.
According to data and estimates from PitchBook, the dollar value of U.S. PE exits rose roughly 15% y/y in 1H24. This is, in part, due to a rebound in IPO exits, which likely owes to a buoyant public equity market and improved clarity on the outlook for interest rates and the economy. That said, the asset class is not out of the woods quite yet. Exits remain far below 2021 levels as public listings remain notably subdued. Corporate and sponsor acquisitions have also fallen, but to a lesser extent, and corporate acquisitions now make up a larger share of exits than normal. Moreover, the number of deals in 1H24, including estimates, rose just 1.3% y/y, while the ratio of PE exits to investments fell to 0.36x in 2Q24 as managers remain focused on putting a near record $3.9tn of dry powder to work.
For public markets, even small improvements in PE exit activity should benefit financials by way of more robust capital market activity. This is already playing out in the 2Q earnings season, with many large banks beating earnings expectations thanks to surging investment banking revenues. However, with interest rates likely to fall slowly rather than drop precipitously, exit activity may take longer to return to normal. As such, opportunities in secondaries, which can provide existing limited partners with liquidity and prospective buyers the chance to invest in seasoned assets at a discount, look increasingly attractive.
Chart of the Week: PitchBook, J.P. Morgan Asset Management. Data
are sourced from PitchBook's “Q2 2024 U.S. PE Breakdown” and are
as of 6/30/2024. Public listings include IPOs and reverse mergers.
*1H24 data includes PitchBook estimates for late reporting deals.
Thought of the week: PitchBook, Preqin, J.P. Morgan Asset
Management.
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Originally Posted July 8, 2024 – Weekly Market Recap
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