US Weekly Kickstart_ Policy uncertainty and market volatility create risk to the much anticipated rebound in capital markets activity

Summary of Key Points from Goldman Sachs US Weekly Kickstart Industry Overview - The report discusses the current state of the US capital markets, focusing on the S&P 500, M&A activity, and IPO trends amid economic uncertainty and market volatility [2][3][4]. Core Insights and Arguments 1. S&P 500 Performance: The S&P 500 has entered a -10% correction territory, leading to a revision of year-end price target to 6200, reflecting a 10% upside from current levels [2][3]. 2. Earnings Estimates: Earnings estimates for the S&P 500 have been trimmed, with 2025 and 2026 earnings revised to $262 and $280 respectively, indicating a growth rate of 7% for both years [3][4]. 3. M&A Activity: - Completed M&A volume growth forecast for 2025 has been reduced to +7% from +25%, influenced by slower economic growth and lower CEO confidence [2][4]. - Announced M&A activity is up 15% year-over-year, with 152 transactions greater than $100 million YTD, aligning with the 15-year average [2][18]. 4. IPO Environment: The IPO barometer suggests a neutral environment for IPOs, with 12 IPOs raising over $25 million so far this year, consistent with last year's pace [2][21][25]. 5. Market Sentiment: Post-election optimism regarding capital markets activity has diminished, with stocks sensitive to capital markets activity declining by 23% since January [2][29][33]. 6. Banking Sector Outlook: The outlook for large-cap banks has softened due to reduced capital markets activity, although analysts remain optimistic about profitability boosts from deregulation [2][34][33]. Additional Important Insights 1. Regulatory Environment: The regulatory posture on M&A transactions is expected to remain stable, which may impact M&A growth, particularly for larger deals [13]. 2. Tariff Risk Scenario: In a scenario where economic growth slows to 1.5%, M&A volumes could contract by 3% in 2025, highlighting the sensitivity of M&A activity to economic conditions [14]. 3. Market Volatility: The VIX index has climbed to 28, indicating heightened market volatility, which is expected to weigh on capital markets activity [3]. 4. Investor Positioning: The Goldman Sachs US Equity Sentiment Indicator suggests light positioning among investors, which could signal potential near-term returns for the S&P 500 [46]. This summary encapsulates the critical insights and data points from the Goldman Sachs report, providing a comprehensive overview of the current state of the US capital markets and the factors influencing M&A and IPO activities.