- M&A, debt
issuanceand the stock market are three areas that have shown record-level activity.
- Economists have been worrying about the fissure between "hard" and "soft" data.
- Goldman Sachs economists predict that faster growth is ahead.
Cash has been flowing fast and
Several measures indicate record activity in the days since the Republican captured the nation's highest office in November.
Mergers and acquisitions have been in a frenzy, companies have been rushing to market with massive amounts of debt issuance, and, of course, major averages in the stock market continue to punch through new highs. Close to 3,100 deals of various stripes have been completed in just the first 100 days.
Some of the first-100-days highlights, as compiled by Thomson Reuters:
- On the deal meter, M&A for cross-border transactions globally as well as U.S. company deals involving other countries both for inbound and outbound M&A are all at record levels for the first 100 days. The global cross-border dollar tally is at $344.2 billion.
forboth investment-grade and high-yield bonds is at record levels as well — $324.6 billion and nearly $88 billion, respectively.
- Follow-ons, or the issuance of more shares after companies first go public, is at a new high globally of $137.2 billion.
- Health care has been a particularly active sector, with a record 63 companies going to the equity markets to raise capital during the period. Those firms have raised $4.5 billion, more than seven times as much as during Barack Obama's first term and more than double the next highest level — $2.1 billion during Bill Clinton's initial four years.
- The Dow industrials are up more than 15 percent since Election Day, the best showing since Ronald Reagan. At the same time, market volatility has been low, with the CBOE Volatility Index falling 6.8 percent since the inauguration and tumbling some 43 percent since the Nov. 8 election.
Market participants have been debating lately the differing signals shown between "soft" economic data — or sentiment surveys from businesses, consumers and investors — and "hard" data, or actual measurements of past activity and future plans.
The soft data have been relatively strong, if weakening a bit lately, while the hard data show significant pockets of weakness, particularly in consumer spending and productivity.
Wall Street is awaiting Friday's GDP report, which is expected to show the U.S. economy expanded only about 1 percent in the first quarter.
Some economists fear that Trump's pro-growth talk is going to give way to the reality that domestic growth is constrained by a number of factors that aren't going to go away. After all, Trump already has run into problems enacting his aggressive agenda of tax cuts, regulatory rollbacks and infrastructure spending boosts, and there are other fundamental barriers in play as well.
"The amount of policy uncertainty is still really high," Mark Doms, senior economist at Nomura Securities, said in an interview. "This can have a very significant effect on investment."
Doms thinks economic growth will remain around the 2 percent level, rather than the 3 to 4 percent range Trump has been predicting. A labor market nearing full employment and a stagnant worker base that is hampering productivity improvements will get in the way of above-trend growth, he added.
"We do not subscribe to that" notion that Trump will be able to meet his aggressive targets, Doms said. "The math is hard. Math is not their friend."
However, hopes persist that the upbeat sentiment will translate into activity, if not in the first quarter then as the year progresses.
Goldman Sachs estimates that while the consensus for first-quarter growth is around 1 percent, that number is more likely around 1.4 percent and will accelerate through the year and average 2.7 percent in the next
"Many investors are skeptical of strong survey data," Goldman economist Daan Struyven said in a note to clients. However, he believes "soft data contain important signals about the present growth pace."
The firm measures growth through its current activity index, which blends hard and soft economic data. That index indicates that "the upbeat signal from surveys about the current growth pace is probably genuine," Struyven said, though he cautioned that some sentiment indicators can be influenced by political beliefs.
In other words, recent surveys have shown Republicans to be far more optimistic about the economy than Democrats are. That may be skewing some of the surveys.
Correction: Daan Struyven is a Goldman economist. An earlier version misspelled his name.
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