Q4 2024 Takeaways:
Markets wrapped up a strong year
- Equities wrapped up a strong year, with large caps leading the way. The S&P 500 returned around 25% for the year, while the S&P SmallCap 600 Index had more modest returns, around 9%.
- Middle market M&A volume and value in Q4 2024 looked very similar to Q3 2024, though as a whole, 2024 volume and value were up 9% and 15%, respectively, relative to 2023.
- Many are looking to 2025 as a resurgent year for M&A.
The Fed, war, and global uncertainty
- While the Fed lowered the fed fund rates by 0.25% in November 2024, some market-based interest rates have actually risen since (such as Treasury yields and mortgage rates), presenting an interesting case study on economic forces at play.
- While there is growing optimism of near-term resolution in Ukraine and the Middle East, war continues, adding to uncertainty, which markets tend to dislike.
New year, new administration – and AI
- Tariffs, tariffs, tariffs. While the new US administration has expressed a willingness to push tariffs as a means to achieve policy, the market willingness to accept this is yet to be seen.
- The new US administration has also put forth a deregulation agenda, which may be a tailwind for M&A in the coming year(s).
- Of course, AI is still grabbing headlines. The market continues to assess the capabilities of this technology on enhancing productivity and boosting corporate earnings. While estimates vary by firm and industry, the consensus is that those who master the use of AI could see profit jump significantly – some saying upwards of 20%.
