2024 Capital Markets Outlook: A Nighttime Drive Down a Country Road With No Lights, Looking Out of the Back Window

January 19, 2024

As CEO of Capital Market Communications Ltd (“Camarco”), I often get asked about the outlook for capital markets in 2024. 

What I am good at is advising clients about how to communicate to shareholders in the equity capital markets. This is what we do. So, if you have any clients where there might be a shareholder or two involved, please call. We’re very good at this sort of thing, and we’d love to help. 

But in answer to the above question, I don’t have a clue. Quite genuinely, I have no idea what 2024 will be like. Peter Drucker when predicting the future said he felt like he was driving down a country road at night with no lights while looking out of the back window.  

So, not to disappoint you, let me tell you what the view through the back window is like.  By the way, if you don’t like horror films I would close your eyes now. 

In 2023, there very few listings in the world. These are called “Initial Public Offerings” or “IPOs” and represent companies coming to the public equity markets (known as “stock exchanges”) for money to support their growth. As such, they are a really accurate measure of the health of capital markets around the world.  

In the United States, which is by far the world’s biggest global financial centre, there were just 133 IPOs in 2023. Yes, that’s right, just 133. This compares with 1,035 in 2021. In the UK, which is another global financial centre, there were only 23 IPOs in 2023, compared with 126 in 2021. And, just in case you thought that continental Europe might come along and save the day, we know that Euronext’s IPOs in 2022 numbered just 44, compared with 108 in 2021. And, in their Q3 2023 results they said that they had done just 18 so this doesn’t look too promising for the full year either. 

I will spare you any more depressing statistics. Suffice to say, that the other signs of a heathy capital market have been pretty non-existent. Mergers and acquisitions have fallen off a cliff and equity raisings, which are new funds raised by existing listed companies, while a bit better, have still been down a lot on previous years.  If you don’t believe me, you only have to look at the thousands of redundancies across all the global investment banks at the moment. 2023 has not been a good year for the investment banker. You might think that if the investment banks are making redundancies then they cannot be confident about the outlook. But you have to remember that they are looking through the rearview mirror too. 

If you skipped the last couple of paragraphs and metaphorically had your eyes closed, you can open them now.  Thankfully, I’ve spotted some more cheery stuff to share with you. 

Recent data out of the United States suggests that they will avoid a recession and high inflation. Similarly, this week’s data from the UK and Europe also shows reducing inflation and indications that interest rates may have peaked.  

In the UK, there has been a big plunge in inflation that surprised everyone and which slowed to just 3.9% year on year from 4.6% in October.  

While the Bank of England’s prudent policy makers seem loath to cut interest rates while inflation remains above target, the direction of travel for prices seems clear.  The UK stock market reacted positively to the news and if you are a bit of a capital markets nerd like me you will have noted that the market for overnight index swaps increased its bets that there will be big interest rate cuts coming up shortly. 

Of course capital markets can be affected by further geopolitical instability – indeed, there are a lot of elections taking place this year – but, notwithstanding that, lower inflation and lower interest rates will help an economic upturn. That leads to increased confidence, not just among consumers and company boards, but also investors. And confidence is what capital markets need as company boards start to invest and retail investors have more disposable savings to put into pensions and other investment funds, increasing the amount of equity available to support company IPOs, mergers and acquisitions and other equity capital raisings. When this happens, of course, those companies that use Camarco to communicate well will do better than those that don’t. As this confidence returns this year, please look out for opportunities to bring us in to help your clients take maximum advantage of the recovery. We’d really appreciate it. 

Having been driving along our country road for a while now with no lights, looking through the rearview mirror, is it just me or is it getting lighter after all? 

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