Fuelled by more easy money from the Federal Reserve, the party was most definitely on as the aches and pains – and, more importantly, the worries – of the financial crisis seemed to disappear in the rear-view mirror. Some of the risky products and practices that not too long ago had an undesirable odour about them were suddenly back in favour.
Just five years on from the crisis – one that seems to have changed the regulatory landscape of the markets forever – yield-starved investors practically stampeded over each other in the race to the bottom of capital structures.
It could hardly have been better for borrowers, who found that the capital markets offered them a cheaper way to do everything from refinance debt to return capital to disgruntled shareholders. Apple printed the biggest bond in history. Just a few months later, Verizon made that deal look puny with a deal that attracted one hundred billion dollars in orders.
Bonds hit record issuance levels, while the US equity market quietly gained some 30% over the course of the year as follow-on equity issuance and IPOs thrived. Emerging markets took their turn in the spotlight. And the US economy showed signs of a recovery that the eurozone hoped, and failed, to achieve.
So what’s to worry about as we head into 2014? Plenty, of course. (There always is.)
The US political infighting about the debt ceiling – never seen at home to be quite so embarrassing and unnecessary as it appears from abroad – is far from over. The can, as they say in the States, was merely kicked down the road.
And the one niggling concern that lasted throughout the year will loom even larger in 2014, because at some point the Fed really will stop buying bonds. It will have to.
Whatever else happens in the course of her career, Janet Yellen will one day be known as the Federal Reserve boss who turned off the taps.
Knowing when that will come to pass – and what will happen in the markets between now and then – requires even more clairvoyance. On the one or two occasions in 2013 when the start of tapering seemed all but inevitable, rates spiked – and there was the requisite wailing and gnashing of teeth.
But it turned out that tapering was very much still evitable, and even the jump in rates didn’t take them far away from historic lows. It was like the cops showing up and demanding the music be turned down; it killed the buzz for a while, but the party continued.
The winners of IFR’s annual awards honoured here took full advantage of their market savvy and their dedicated professionalism to negotiate this always unpredictable terrain. They are not clairvoyant, but they worked hard and intelligently and well. Making hay while the sun shines is harder than it sounds – as this year’s deserving winners would surely agree.
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