August 12, 2024 Edition

In this week's newsletter, we cover some promising economic indicators, including US weekly jobless claims drop, the Bank of Japan's policy stance, and the impressive fundraising performance of a major private equity firm. These updates suggest a potential soft landing for the US economy, continued monetary policy support in Japan, and a resurgence of dealmaking opportunities for alternative asset managers.

US weekly jobless claims drop calms market fears

(Source: Reuters) The number of Americans filing new unemployment claims fell by 17,000 to 233,000 for the week ending August 3, 2024. This was a larger decrease than the expected 240,000 claims and marked the largest drop in about 11 months. The drop in claims eased concerns about a deteriorating labor market, following a sharp increase the previous week. Investors adjusted their expectations for Federal Reserve interest rate cuts, reducing the probability of a 50-basis-point reduction in September.

We see a strong likelihood of a soft landing for the US economy, with Q2 growth rebounding, a manageable unemployment rate, and market valuations largely supported by earnings growth.

Bank of Japan won't raise rates when markets unstable, deputy governor says

(Source: CNBC) The Bank of Japan (BOJ) will not raise interest rates when financial markets are unstable, as stated by Deputy Governor Shinichi Uchida. The recent strengthening of the yen is considered in BOJ's policy decisions as it lowers import prices and overall inflation, reducing the need for rate hikes. Due to the current sharp volatility in both domestic and global financial markets, the BOJ finds it necessary to maintain its current level of monetary easing for the time being.

Our analysis believes the unwinding of the Japanese carry trade has stabilized, with the worst of the selling pressure behind us and ongoing deleveraging proceeding in an orderly manner. We see strong market valuation support and expect continued performance despite volatility; alternative assets like private credit, private equity, and infrastructure offer valuable stability during such volatility spikes.

Private equity group Carlyle doubles fundraising to over $12bn

(Source: Financial Times, Private Equity Wire) Carlyle doubled its fundraising in Q2 2024 to over $12 billion, driven by its Japan buyout fund, real estate, and credit businesses. The firm is close to halfway to its 2024 goal of raising $40 billion, and it reached a record $435 billion in assets under management. Carlyle announced the sale of a large portfolio of US natural gas power plants for $3 billion, indicating a potential comeback for deals. Rival firms like Ares, Apollo, Blackstone, and KKR deployed over $160 billion in Q2 2024 as they prepared for a potential dealmaking revival amid expectations of US Federal Reserve rate cuts.

We anticipate a resurgence in dealmaking with expected interest rate cuts, leading to increased exit opportunities and strong returns for private equity investments from Q3 2024 onwards.

This week's updates suggest a positive outlook for the US economy, continued monetary policy support in Japan, and a potential revival of dealmaking activities in the private equity space. We believe these developments offer opportunities for alternative investment strategies to navigate the current market environment and deliver strong returns for our clients. Please reach out to our team at https://www.altive.com/en if you would like to discuss these topics further or explore how we can assist you with your investment needs.

Disclaimer: This newsletter contains information from public sources, and any investment decisions made based on its contents are at the reader's own risk.