Amid growing geopolitical tensions in the Middle East, a historic port strike, and other global macroeconomic uncertainties, Erik Hirsch, Hamilton Lane’s co-CEO, joins Julie Hyman and Josh Lipton on Market Domination to outline his expectations for the market.
“In terms of where we sit today, the economy looks very strong. The job numbers [are] a little soft, but we're also seeing layoffs very soft as well and so we're seeing a resilient consumer. We're still seeing strong spending. We're seeing a continued positive outlook for the CEOs of our businesses. So that's where we are today,” Hirsch tells Yahoo Finance.
He adds, “The picture you're painting, though, is very uncertain about what tomorrow may look like. And so certainly what's happening in the Middle East and what's happening with the ports. All of that is a bit concerning.”
Ahead of the November election, “There's no question that on some levels we're seeing people simply deferring a decision or saying, ‘ask me in two months.’ Hopefully, the election is settled at that point, a little bit more transparency on where developments are occurring in the Middle East, and so in that case, if they have the luxury to do that, then that's what they're doing. In other cases, they're still seeing strong spending. And strong demand for their products. And so it is still pedal to the metal, and they're not slowing down.”
Well, for more on what's ahead for the markets, let's now welcome in Eric Hirsch, Hamilton Lane, co-chief executive officer. Eric, it's good to see you. As Julie was just saying there, a lot of powerful cross currents, Eric. You know, we have these rising geopolitical tensions, historic port strike. Of course, you also have China stimulus to consider. Uh, what are you looking at here, Eric? What are you trying to stay focused on?
Well, Josh, nice to see you. Nice to be back. I think we're looking at all of those things. I mean, none of that is painting a particularly attractive picture right now, but I think this is different in terms of what has happened and where are we versus where we might be. So in terms of where we sit today, economy looks very strong, the job numbers a little soft, but we're also seeing layoffs very soft as well. And so we're seeing a resilient consumer, we're seeing strong spending, we're seeing continued positive outlook for the CEOs of our businesses. So that's where we are today. The picture you're painting though is very uncertain about what tomorrow may look like. And so certainly what's happening in the Middle East and what's happening with the ports, all of that is a bit concerning.
Um, and so when you talk to your CEOs, when you hear from your CEOs, um, are they more cautious on spending decisions, for example? I mean, we also of course have the outcome of the presidential and congressional elections here in the US. So, uh, are we seeing a waiting game being played at all to make some big investment decisions?
Julie, I think it's a question of where what sector are they in and what kind of a time horizon are they on. So there's no question that on some levels, we're seeing people simply deferring a decision or saying, you know what? Ask me in two months. Hopefully the election is settled at that point, a little bit more transparency on where developments are occurring in the Middle East. And so in that case, if they have the luxury to do that, then that's what they're doing. In other cases, they're still seeing strong spending and strong demand for their products, and so it is still pedal to the metal and they're not slowing down.
So you sound overall like relatively constructive on the uh, on the American economy, Eric, which is, you know, what J. Powell sounds like too. What, what would be on your list of worries for the economy, not just near term, but intermediate term here as well?
Well, I think an unsettled election I think certainly weighs on us. I mean, if you come out of this with an electoral college tie or a question of how long are we waiting for results, I think all of that could create some real uh, uncertainty uh, in the market and also in our society. So we're certainly keeping a close eye on sort of how the election is proceeding. And again, what's happening in the Middle East with escalations, I think is also very concerning whether that's going to impact oil pricing or whether there is a contagion effect on a military basis, I think that is also something that we're keeping a close eye on.
Um, what do you think is going to happen? You know, we're talking mostly about sort of internal investments in the business. I'm curious also what's happening with deal flow outside of these businesses. In other words, you know, are we going to finally see the much awaited pickup in things like IPOs or M&A for that matter?
So this is a question, I think, where you sit. So today at Hamilton Lane, our deal flow is literally at record levels. We have an abundance of capital, a tremendous global reach, and deal flow has been our uh, has been our friend. So for us, we're sitting in a very enviable spot at that point. Now, as I look into 2025, I do think we're going to see an uptick of IPOs. I think the one of the reasons why the market remains a little chilly today is really around the election and people not wanting to price or getting getting into a road show right in the midst of an election season. And so better to probably wait, and then again, if we wait, now we're in the holiday season. So I would expect that the first quarter of 2025, you're going to see a lot more volume on both the IPO side and the M&A side. The big caveat though is back to what we're talking about. This presumes that this, uh, the port impact is sort of short lived, which I think it will be, and that we don't see massive spill over in the Middle East, which I don't think we will see.
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The CEO says, “An unsettled election, I think, certainly weighs on us. I mean, if you come out of this with an Electoral College tie or a question of how long are we waiting for results, I think all of that could create some real uncertainty in the market and also in our society. So we're certainly keeping a close eye on sort of how the election is proceeding. And again, what's happening in the Middle East with escalations, I think, is also very concerning whether that's going to impact oil pricing or whether there is a contagion effect on a military basis. I think that is also something that we're keeping a close eye on.”
Hirsch expects an uptick in initial public offering (IPO) and merger and acquisitions (M&A) activity in the first quarter of 2025 after the market knows the election results and there is more clarity about the Middle East conflict. “The big caveat, though, is back to what we're talking about. This presumes that the port impact is sort of short-lived, which I think it will be, and that we don't see massive spillover in the Middle East, which I don't think we will see.”
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This post was written by Naomi Buchanan.