Daily Spotlight: Opportunities in the Capital Markets Sector

Summary

Allocating capital is one of the core competencies of the U.S. economy. That doesn’t mean the industry isn’t cyclical, and the recent period of high rates certainly has been a challenge. Consider the IPO segment of the industry. The U.S. initial public offering market, which sizzled in 2021 with 1,144 IPOs and a total transaction value of $253 billion, saw a sharp downturn in 2022, with only 368 deals raising $20 billion. IPO valuations improved markedly during 2023, but overall activity again fell as the uncertain economic environment and still-high interest rates kept private companies on the sidelines. The Unicorns vanished. Meantime, the asset management and brokerage segment, which suffered from lower stock valuations in 2022, experienced improved valuations throughout 2023 and into 2024, which has had a positive impact on earnings results. The financial exchange and data segment has a strong backdrop, with higher trading volumes due to global macro developments leading to volatility across equity, fixed-income, currency, and commodity markets. But those sharply higher interest rates have pushed up the cost of financing and

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