Is M&A Activity Indicating The End Of The Bull Market?

A new report by Credit Suisse discusses the ongoing merger and acquisition (M&A) wave and how prudent traders can use M&A data and news to earn big profits. In the report, analysts explain the implications of M&A activity, not just for the parties involved, but for the overall stock market.

M&A implications
Analysts believe that the world is still in the upswing of the current global M&A cycle. However, the implications of M&A activity reach far beyond the companies making the moves.
According to the report, M&A activity is a good leading indicator of bull market peaks in the stock market. Cash-financed M&A provides nearly a third of the corporate demand for equities. Once M&A activity reaches its peak, the stock market typically peaks about eight months later.

Telecom acquirers have provided the largest returns, whereas consumer staples and utilities acquirers have provided the worst returns.

Materials and IT buyout targets have historically been purchased at the highest premiums. Analysts also note a “curious positive correlation between premium paid and outperformance” in these two sectors.