Tags: Hulbert | M&A | market | stock

Hulbert: M&A Boom May Be Sign of Market Top

By    |   Monday, 23 June 2014 09:31 AM

The surge of mergers and acquisitions (M&A) in recent months may signal a coming decline in the stock market, Mark Hulbert, editor of Hulbert Financial Digest, writes in his Wall Street Journal column.

If deal-making continues on its current pace, M&A spending would total $3.51 trillion for the year as a whole, the most since 2007, according to Dealogic. Stocks peaked in October of that year, of course.

"Each of the last five great merger waves on record [going back more than 125 years] ended with a precipitous decline in equity prices," Matthew Rhodes-Kropf, a Harvard Business School professor, tells Hulbert.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

And some experts see danger for the stock market now as a result of the M&A wave.

"The marked increase in recent M&A activity is one more piece of evidence that the market is dangerously overvalued," Dennis Mueller, an emeritus economics professor at the University of Vienna, Austria, tells Hulbert.

So far, though, the merger boom appears, if anything, to be helping stocks. The S&P 500 hit a record high Friday.

But Hulbert warns that investors shouldn't get out of stocks because of the M&A boom. "The volume of M&A activity isn't an exact market-timing tool."

"This is an energy bunny sort of market that wants to keep marching higher and for a good reason," Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, tells Bloomberg.

"The U.S. economy is showing varying signs of improvement. Earnings are rising, interest rates are low and inflation is elevated, but not at extremes. That's a favorable environment for equities to march higher.”

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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InvestingAnalysis
The surge of mergers and acquisitions (M&A) in recent months may signal a coming decline in the stock market, Mark Hulbert, editor of Hulbert Financial Digest, writes in his Wall Street Journal column.
Hulbert, M&A, market, stock
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2014-31-23
Monday, 23 June 2014 09:31 AM
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