January 5, 2018
By Derek Thomson, Capital Markets Research Leader, PwC Deals
The new year has arrived. We’ve been busy analyzing what happened in 2017 and looking ahead to how last year might affect the new year. Here are the top five things you need to know from our Annual US Capital Markets Watch for 2017:
1. All three major US indices had a record-breaking year in 2017
In the equity markets, 2017 was a year for the record books. Continuing the positive trend at the end of 2016, this year started off strong and kept going. This historical performance was supported by a solid economy.
2. 2017 IPO volume and value surpassed last year’s results
A relatively active US IPO market in 2017 reversed the declines of the prior two years and represented one-quarter of global IPOs. IPO volume in the US returned to meet its prior 6-year average, with a wide diversification of industries.
2017 was a choppy year with a quiet summer and active second and fourth quarters, including November, which was the busiest month for IPOs in two years. The number of foreign IPOs doubled to 33 in 2017, accounting for 18% of IPOs. Spin off activity declined this year, with only 19 spin offs and 7 carve outs completed.
3. Economic indicators are strong
US Q3 GDP growth was at 3.2%, the strongest in over two and a half years. High corporate earnings growth and a record low interest environment combine to fuel a healthy macro-economic outlook. Unemployment was at 4.1%, a 17-year low, and market volatility hit a 24-year low. Consumer confidence in November was the second-strongest in 13 years.
4. Rising equity markets drove follow-on issuance as insiders sought to take advantage of strong returns
Follow-ons had a strong showing in the first half of 2017, with 211 issuances in Q1 and 190 in Q2. The market slowed in the second half of the year, with 157 issuances in Q3 and 179 issuances in Q4.
5. Refinancings drove high-yield debt activity in a record-low interest rate environment
2017 was the strongest year in the US high-yield debt markets since 2014, reversing a downward trend with 511 deals raising $277 billion, representing a 41% increase in activity from 2016. The US high-yield market was primarily driven by companies seeking to refinance, resulting in two thirds of activity and dollar value raised this year used for refinancing.
Last year was a very strong year for the US equity markets. The healthy economic indicators take us into the new year, which is always helpful. We’ll be keeping a close eye on how the markets are performing throughout 2018. Be sure to sign up to receive our Deals Blog newsletter so you don’t miss any of the latest news and commentary. To get a more in-depth review of the 2017 capital markets, check out our 2017 Annual US Capital Market Watch.