NEW YORK – The beating Wall Street suffered this past week might have actually created the perfect conditions to launch its revival – cheaper stock prices can herald a comeback for corporate acquisitions.
Dealmaking has been one of the market’s biggest drivers, with some $1.26 trillion worth of acquisitions and private equity transactions announced in the U.S. so far this year. Market watchers believe mergers and acquisitions might be the catalyst to help get Wall Street back on track after the volatility seen recently.
Investors have weathered some tough sessions where stocks zigzagged, making triple-digit gains and losses. The Dow Jones industrials rose more than 150 points on Wednesday, then plunged about 400 points on Thursday and fell more than 200 points Friday before closing with a 31 point loss.
Analysts are quite mixed about where the market goes from here. Some believe this could be the start of a darker period for the economy, and that the U.S. could be near a recession. Others say this is exactly the kind of environment needed to trigger another buying spree on Wall Street.
The four-year bull market has enabled U.S. companies to build record cash stockpiles, with Standard & Poor’s 500 components now sitting on about $600 billion. And, sluggish market periods make it more difficult for companies to raise earnings by organic growth alone – forcing them to make acquisitions.