Pledges for sweeping tariffs by incoming president Donald Trump have seen uncertainty sweep across the initial public offering (IPO) market, major banks have warned.
Trump, who will take office for a second term in January, repeatedly signalled in campaigning that wide-ranging tariffs would be introduced in line with a protectionist agenda.
Though markets appeared to bat off the threats with a broad rally in the wake of his election victory in November, warnings have emerged over such measures on the IPO market ahead.
“Some uncertainty still lingers,” JPMorgan capital markets global head Kevin Foley said in an interview, cited by Bloomberg.
“There’s optimism that the new administration will bring deregulation and reduce inflation, but tariffs are inherently inflationary.”
Such threat of renewed inflationary pressure has already caused markets to price in a slower path for interest rate reductions over the year ahead by the Federal Reserve.
According to Bloomberg, private equity firms were sitting on some $3 trillion worth of deals to sell or take companies public as of October before the new potential cost pressures hit.
Some $43 billion had been raised this year through floats in the US, up 60% on 2023 but only as markets recovered from an IPO drought in the wake of aggressive interest rate hikes previously.
Wells Fargo & Co (NYSE:WFC, ETR:NWT) equity capital markets co-head Clay Hale added the tariffs threatened a new wave of market volatility.
“When there’s volatility in the market and investors are focused on their portfolio, they’re less likely to want to engage in adding a company from the private markets,” he said.