2016 Annual US Capital Markets Watch

Did you know, that in 2016...

  1. IPOs beat the market seeing aftermarket returns of 23%—this is the fourth time IPOs have outperformed the market in the last five years.
  2. Pharma & life science and technology IPOs led all IPO activity for the fourth consecutive year.
  3. The US attracted large IPOs from non-US issuers, who raised $7.8 billion.
  4. Oil & gas IPOs returned in the third quarter, with four IPOs raising $1.4 billion by year-end.
  5. US investment-grade debt raised a record $1.3 trillion, as deal sizes continued to increase.

US stock markets ended 2016 near record highs after early-year market volatility

The latter half of 2016 saw a strong rally in US markets with all major US indices reaching record highs. This was a positive ending to a year which saw substantial spikes in volatility beginning early in the year with a market sell-off that mirrored falling energy prices and continued due to uncertainty around geopolitical events such as the Brexit vote and the US elections. Investor confidence improved in the second half of 2016 in part due to stronger US economic news and a recovery in commodity prices.

Oil price recovery boosted energy and peripheral sectors

After beginning the year in a downward spiral with WTI falling below $30/bbl, oil prices showed signs of a strong recovery. The December OPEC and non-OPEC agreements to limit output contributed to prices rising to more normalized levels.

2016 finished with strong US economic indicators

The optimism suggested by the market rally was supported by the healthy economic indicators which showed a robust US economy. Unemployment hit 4.6% – the lowest since the financial crisis, while the third quarter GDP number was revised upward – from 2.6% to 3.5%. However the outlook for 2017 is one of global divergence. While US growth is expected to increase in 2017, the rate of growth in the EU and China is expected to decelerate.

Late 2016 saw interest rates increase—only the second increase since the financial crisis 

The decline in market volatility after the first quarter, coupled with the improving performance in the US economy, provided the Fed with the necessary data to support their decision to raise the benchmark interest rate range to 50-75bps in December. This was the first rate increase in 2016 and only the second increase since the financial crisis. The Fed indicated an additional three possible rate increases in 2017. This drove activity in debt markets as companies looked to refinance ahead of expected future rate increases.

Unicorns look ahead to 2017

Although the past two years have seen relatively fewer technology IPOs due to market volatility and the increased availability of private financing, the strong performance of US technology IPOs and expected investor interest have given unicorns a reason to look to access capital markets in 2017.

Capital markets activity decreased overall—but showed strength in latter half of 2016

The market volatility early in the year dragged down activity across the spectrum of financing options on a year-over-year basis. However, as volatility subsided, deal activity increased in the second half of the year, though not fast enough to make up for early declines.

Contact us

Bob Saada
Partner, US Deals Leader, PwC Deals
Tel: +1 (646) 818 8043

David Ethridge
IPO Services Leader, PwC Deals
Tel: +1 (212) 845 0739

Julian Brown
President, PricewaterhouseCoopers Corporate Finance LLC
Tel: +1 (646) 471 1198

Farhad Zaman
Partner, US Capital Markets Practice Leader, PwC Deals
Tel: +1 (646) 471-5376

Follow us