Contact: Brenon Daly
Just as this summer’s stock market rally is the only reason the major US equity indexes are in the green this year, the M&A surge since June is solely responsible for elevating 2016 above a sort of middling year for tech dealmaking. The recent activity in both markets has been fairly astounding. The Nasdaq has soared 8% just since the start of July. Meanwhile, tech acquirers announced deals worth $91bn last month – the third-highest monthly total since the end of the recession in 2009.
For both stock traders and dealmakers, the second half of 2016 has started with a sprint. But will the two markets, which are correlated, be able to sustain the pace? Or will the shared worries around global stability and economic growth slow them?
Focusing just on Wall Street, confidence there is waning, if only slightly. In the latest survey of investors by our ChangeWave Research service, nearly half (44%) of respondents indicated that they were ‘less certain’ about the direction of the US stock market now than they were three months ago. Although that is down from the levels reported during the bear market at the start of 2016, we would note that the pessimistic assessment in July – with more than three times as many respondents saying they were ‘less confident’ than said they were ‘more confident’ – came during the biggest stock market rally of the year.
Meanwhile, that lack of confidence is also being felt by a number of tech vendors, with recent growth forecasts being pulled in or even reversed. And even though some companies have sounded more cautious in their outlook during the ongoing Q2 earnings season, actually hitting those diminished expectations could prove more challenging than expected. Consider this: 22% of ChangeWave survey respondents said their IT budget in the second half of 2016 would be lower than the first half, compared with 17% who said they expect to have more to spend.
