Summary:
According to data from S&P Global Market Intelligence, there have been 591 US corporate bankruptcy filings so far this year, marking the highest level since 2020. The surge in filings is attributed to the end of the era of ultra-low interest rates that began in 2008. However, experts believe the trend could stabilize going forward.
Interest Rate Expectations:
Money markets have already factored in the expectation that the US Federal Reserve will maintain current interest rates in its upcoming decision. Traders are estimating a 75.3% probability of a rate cut in May, according to CME Group’s FedWatch tool.
Global Economic Slowdown:
Despite the optimistic outlook, concerns remain regarding a potential global economic slowdown. Danni Hewson, head of financial analysis at AJ Bell, warns that this could lead to further casualties in the coming year.
Sector Analysis:
Data from S&P Global reveals that consumer discretionary companies, including well-known retailers like Bed Bath & Beyond, have accounted for the highest number of bankruptcies in the first 11 months of 2023 with 76 filings. Catherine Corey, global head of restructuring data at Debtwire, predicts that the retail sector will continue to experience significant bankruptcies next year.
Impact on M&A Activity:
The overall mergers and acquisitions (M&A) landscape in the US has been relatively subdued this year. S&P Global reports that 13,466 deals were announced through December 5th, with a total deal value of $1,038.3 billion. In comparison, the previous year saw 19,192 deals announced, totaling $1,382.4 billion. Peter Cardillo, chief market economist at Spartan Capital Securities, suggests that the increase in acquisitions might indicate companies’ willingness to be acquired instead of facing challenging times ahead.