Overall M&A Market Commentary
Download Report PDF
At 115 months and counting, the current U.S. economic expansion is in record territory. After eight years of fed policy induced stock market tranquility, stock market volatility returned in 2018 with a vengeance. Even with more market volatility and a growing number of potential economic concerns, there are still no clear signs of an imminent recession. While there is speculation as to when the recovery will end, it looks like the great economic expansion of 2009 will continue well into 2019. GDP growth continues its pace above trend with 3Q18 GDP a strong 3.4% following the extraordinary 2Q18 measure of 4.2%. If estimates of 4Q18 GDP hit the low 2% range as anticipated, annual 2018 GDP will have topped 3% for the first time since 2005. The GDP results in 2018 could be a tough act to follow. Most analysts are calling for 2019 GDP growth between 2.0% to 2.5%, still above the trend of 2%. According to Chicago Fed President, Charles L. Evans in a January 2019 speech, “Solid economic fundamentals lead me – and most other forecasters – to expect another good year in 2019…” Evans continued, “The vibrant labor market and corresponding increases in household income were key factors behind strong consumer spending; the 2017 personal income tax cuts also contributed. In addition, business investment was strong last year, boosted in part by a variety of changes to the tax code.”
As the Chicago Fed President indicated, the U.S. jobs market is strong and improving. The record December 2018 jobs report put an exclamation point on the current economic environment. With 2.6 million jobs created in 2018 and wage growth climbing to 3.2%, the working public will have more disposable income to consume goods and services, which should extend the recovery well into 2019.
For additional insight on middle market M&A, valuation multiples, strategic buyer / financial sponsor activity, and more please download the full copy of the Prairie Middle Market Perspective.