New York’s investment banks are signaling upswings in two business lines that don’t usually take off at the same time: advising ambitious companies on expansions, while helping others drowning in debt.
The rare simultaneous waves of dealmaking and restructurings were the talk of one conference call after another as boutiques including Evercore Inc., Lazard Inc. and Moelis & Co. reported first-quarter results in recent days. It underscores, once again, how enmeshed those firms’ fortunes are with the Federal Reserve’s interest-rate decisions — and how the steepest US inflation in a generation is bending norms.
“With each passing day, it is clearer that rates will remain higher for longer,” PJT Partners Inc. Chief Executive Officer Paul Taubman told analysts after posting the firm’s second-highest revenue on record, helped by restructuring fees. “We see the environment getting more constructive by the day.”
Companies that slammed the brakes on takeovers when the Fed initially raised rates have resumed the hunt for acquisitions as financing costs become more predictable and the economy stays robust.
At the same time, those higher-for-longer rates are pressuring overly indebted companies to seek restructuring rather than wait.
Even then, the Fed retains the ability to shake things up.
On the day Lazard posted a record profit and the highest advisory revenue of its peers, the firm’s shares slipped as hotter-than-expected US inflation numbers came through. Days later, the stock advanced again after Fed Chair Jerome Powell said the central bank’s next move probably won’t be to raise rates even higher.
Shareholders also got reminders that it takes a while for an uptick in dealmaking to translate into profits. Transactions have to be hashed out and completed before bankers reap their full rewards.
Results from bulge-bracket firms’ investment-banking franchises and the boutiques that compete with them mostly missed analysts’ estimates — except for Goldman Sachs Group Inc., PJT and Lazard.
Investors waiting for a surge in deals to materialize will need more patience, according to Neil Sipes, an analyst at Bloomberg Intelligence.
“Sentiment around the boutiques had been building in the hope that dealmaking would rebound more quickly,” he said. “Those expectations may now dampen a bit, with lingering market uncertainty and deals still taking a while to come through the pipeline.”
In a coup for Lazard’s new CEO, Peter Orszag, the firm beat every peer on advisory revenue for the first time since the third quarter of 2020.
Read More: Megadeals Make a Comeback to Power $660 Billion M&A Revival
Still, one quarter isn’t enough to cement dominance. The firm that ceded that spot, Evercore, has led the entire investment-banking sector on megadeals above $10 billion that have been announced so far this year, according to data compiled by Bloomberg.
The rivalry for talent is active as firms jostle to take advantage of the coming pipeline. In recent weeks, Evercore, led by John Weinberg, poached a group of top bankers in Paris from Lazard, including the co-chair of investment banking in the country, Charles-Henri Filippi.
Read More: Top Lazard Banker Filippi Set to Join French Exodus to Evercore
The outlook for more deals remains positive for just about every boutique.
“Our pipeline continues to build,” Moelis & Co. CEO Ken Moelis said on his call with analysts. “Our backlogs are robust and strong” were the words of Evercore’s Weinberg. And at Lazard, Orszag cited “ongoing momentum.”
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
