The Securities and Exchange Commission’s Division of Economic Risk Analysis (DERA) recently published the first Economic and Risk Outlook. The release coincided with the SEC’s December 4, 2019 conference on the State of the Securities Markets. The report addresses a number of macroeconomic indicators. The report notes elevated borrowing offset by positive economic growth, high asset values, and low interest rates, which have kept debt service burdens within normal historical ranges. The analysis of the inverted yield curve may point to an upcoming economic downturn; however, the report cites countervailing factors that may be altering the historic correlation between an inverted yield curve and a recession.
The report includes a number of statistics and observations regarding the IPO market. The report attributes increased IPO activity to elevated valuations (based on an assessment of enterprise value/EBITDA).
The increase in IPO activity in recent quarters, led by technology companies, has led to the largest single quarter (second quarter 2019) of IPO origination in the last five years.
