Octus Radio Jim Schaeffer on Market Volatility, Dividends & Liability Management
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Aug 19, 2024 Jim Schaeffer, global head of leveraged finance at Aegon Asset Management, shares insights on recent market volatility and its impact on M&A and dividend recaps. He discusses the challenges posed by fluctuating interest rates and the Federal Reserve's inflation management. Schaeffer highlights the growing trend of liability management as companies seek liquidity in a high-interest environment, plus the dynamics of the leveraged loan market. He also touches on predictions regarding corporate bankruptcies amidst economic uncertainty.
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Market Volatility Drivers
- Market volatility is primarily driven by economic data and the Fed's actions.
- One data point can cause significant market fluctuations, highlighting the current sensitivity.
The Fed's Unprecedented Task
- The Fed's current task is unprecedented in scale, aiming to induce a recession to control inflation.
- This creates market uncertainty due to the unusual economic conditions.
Leveraged Loan Market Dynamics
- The leveraged loan market is bifurcated, with high demand from CLOs driving repricings.
- Increased M&A activity and a potential shift to lower rates could stimulate new loan issuance.