Figure 8
U.S. IPO vs S&P 500 YTD
Outlook
Over the review period, equity markets have been influenced
by economic data releases, corporate earnings results and
fiscal policy uncertainty. However, the markets continue to
be primarily susceptible to U.S monetary policy and expected
changes. Three rounds of Fed stimulus have driven up the
U.S. equity markets sharply this year, with the S&P 500 rising
more than 160% from the bear-market low in March 2009.
Up 25% so far in 2013, its highest level in more than three
years and trading at 17 times reported earnings, the index
appears poised to continue moving higher through the yearend and into the first quarter of 2014.
Source: Bloomberg, First Citizens Research and Analytics
Supported by the healthy wave of success in the IPO
market, Twitter Inc. successfully launched its shares in early
November, almost doubling in its trading debut as investors
paid a premium for promises of fast growth. From the sale
of 70 million IPO shares at USD26, Twitter raised USD1.82
billion the biggest Internet trading debut since Facebook Inc’s
in May 2012. Opening at USD45.10 on trading day, the stock
recorded an impressive first day 73% gain, which was far
from unprecedented in this current IPO market. For the year,
six U.S. listed companies have seen their share price more
than double in trading debuts, the biggest year for 100%
one-day jumps since 2006. However, among IPOs raising
USD500 million and more, Twitter’s one-day gain ranks the
eight-biggest on record as larger companies are less prone to
first-day rallies.
12
Caribbean Investment iQ December 2013
Uncertainty with regard to anticipated changes in the U.S
fiscal and monetary drivers would weigh heavily on the
projected year-end performance. On the fiscal front, it is
conceivable that investors will be forced to watch with caution
another debt-limit showdown in Washington as the current
temporary deal to resolve the impasse in Congress in October
expires in mid-January. However, sentiment that Republicans
would avoid the risk of another government shutdown, have
reduced the investor fears of this threat. Regarding monetary
policy, despite widespread market predictions to the end
of tapering, Fed policymakers have kept their options open
and did not rule out beginning to taper its asset purchase
in December at its October meeting. Notwithstanding, the
changing of the Fed Chairman and delay in reliable economic
data have led expectations that tapering may not begin until
March 2014.
Concerns that the equity market is approaching overvalued
levels, presents opportunity for market-correction at any less
than favorable news. However, looking at the big picture, the
current environment is favorable for equity investment which
we believe would continue to be propped-up by the Fed’s
decision to delay tapering.