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Tatton Asset Management Plc

Swilling cash eases the market mood music

As the electoral machine whirrs on here, global capital markets have had a comparatively quiet week. The resurgent optimism of the last few weeks has waned somewhat, without turning around. But the US’s S&P 500 is still sitting at an all-time high, which may well be due to private equity funds: they are awash with cash and have had difficulty finding unlisted targets that are profitable enough.

The move by KKR (formerly Kohlberg Kravis Roberts & Co, one of the private equity giants) for Walgreens Boots suggests that they are having to turn to the less preferred route of taking large listed companies private. That’s risky in execution terms, but at least utilises larger blocks of that cash (even though a large proportion of the buyout funds will be borrowed). They also tend not to be so dependent on the near-term underlying economic background (because they take so long to organise and execute), perhaps underpinning markets against soggy economic data. The drip of private equity leveraged buyouts of listed firms has yet to become a flood, but mergers and acquisitions like these tend to set a trend, helping the equity market in general, and the recently so unloved “value” stocks in particular.

Despite this positive, stock market indices around the world traded mostly sideways throughout the week. As for why this is, we turn to the usual suspects. The latest indicators show that the global economy is still sluggish, with growth slowing yet again. 

Tatton Asset Management PLC (LON:TAM) offers a range of services to directly authorised financial advisers in the United Kingdom. The Company provides on-platform portfolio management, regulatory, compliance, and business consulting services. 

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.