Initial Public Offerings (IPOs) of stock to raise capital are heating up with a possible record setting launch of Alibaba this month (~16—$20 Bill’). US IPO’s are on course to reach 14 year highs in issues and dollar volume this year, still well below the 90’s pinnacle. A long term peak in IPO’s coincide with major stock market tops.
After a stellar 12 months of stock market gains > 23% without any serious correction and a record level of investor optimism, will the continued onslaught of new companies being launched suck too much air out of the demand for stocks?
Long term that is unlikely due to low interest rates, record sideline cash, strong earnings growth and an early stage IPO market only a year into a multi-year surge such as the 1990’s. Short term, September and October will be of interest with all the good news from Google, Apple, Samsung, Facebook and now Alibaba coming out and draining investor cash from current stock holdings and exhausting sideline cash temporarily.
Additionally there is the ongoing and escalating risk of Russia tightening its grip on Ukraine as the US and Europe keep playing Checkers with Putin. Ukraine has been a Russian/Soviet puppet for decades and there is no way he will allow it to align with Western countries. As we expected months ago he is now sending in tanks and troops to slowly extricate Eastern Ukraine. Before the winter is through it’s likely Putin will virtually bank-rupt Western Ukraine as it controls most of its energy supplies as well as for much of Europe.
ISIS threats targeting the West are also a growing risk.