Monday Market Minute | Nov 18, 2019

US-China Phase One deal optimism lifts markets — risk appetite returns

What Moved

Reports that the US and China were nearing a "Phase One" trade agreement sent global equity markets to new highs. The S&P/TSX Composite rose to record levels, driven by broad-based sector gains. Bond yields rose modestly as safe-haven demand receded, and the VIX fell below 13 — its lowest level since July. The improved trade outlook reduced the probability of further Fed cuts, stabilizing the global rate environment.

Why It Matters

The improving trade backdrop removed the primary overhang that had constrained PE deal activity throughout 2019. Sponsors who had been cautious — maintaining elevated cash positions and delaying deployment — found the window for year-end transactions widening. For private markets broadly, the combination of stable rates, improving trade conditions, and rising public market valuations supported exit activity, potentially accelerating distributions to LPs heading into year-end.

Signal to Watch

PE exit volumes in November and December would indicate whether improved sentiment translated into realized transactions. A strong close to the year would improve fund-level IRRs and support fundraising for 2020 vintages — a virtuous cycle that benefited both GPs and LPs.

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