A key market indicator just got triggered.
In a report about it last week, Bloomberg wrote that we could be headed for a record.
Every time this has happened in the past, investors made a fortune.
But this time around, you could make a fortune.
In fact, our forecasts show that you could earn gains of 1,000% or more…
Two Ways To Grow
Before I reveal the market that Bloomberg is referring to, let me explain why we could be headed for a record.
It has to do with how companies grow. You see, companies have two paths to growth:
#1 — They can grow “organically” by building up their operations over time, or…
#2 — They can grow instantly by acquiring other companies.
Today, we’re going to focus on #2, acquiring other companies.
This strategy is known as Mergers & Acquisitions (M&A). And as you’ll see in a moment, it can lead investors like you to earn huge returns.
Headed for a Record
Companies are always looking to grow, so there’s always a certain level of M&A.
But once in a blue moon, M&A activity goes off the charts. And if you know how to take advantage of it, you could make a fortune.
We now find ourselves in one of those rare times. In fact, M&A is so strong right now that, as Bloomberg just reported, 2019’s total might exceed last year’s record.
So far this year, there’ve been 26,321 transactions that add up to $2.73 trillion.
That figure was boosted by Schwab’s deal to buy TD Ameritrade for $70 billion, as well as several multi-billion-dollar deals from biotech companies like Novartis.
There are three main catalysts behind this jump in activity.
Let’s look at each of them.
Three Catalysts for Record M&A
Any of the following catalysts could cause a flurry of M&A activity.
But when they occur at the same time, M&A activity skyrockets. That helps explain why Susie Scher, a Goldman Sachs executive, calls this a “Goldilocks environment.”
Catalyst #1 — Low Interest Rates
When interest rates are low, corporations can borrow money cheaply.
This provides them with billions of dollars to spend on M&A.
During the recent M&A boom that started in 2017, the Federal Funds Rate was in the 5% range. That meant money was cheap to borrow.
But today, rates are even lower: just 1.5% to 1.75%.
Rates now have nowhere to go but up. That’s why companies are so focused on M&A…
As soon as rates rise, easy access to capital will disappear.
Catalyst #2 — Record-High Stock Prices
Instead of paying cash to fund M&A, companies often pay with their own stock. This is particularly effective when the stock market is at high levels.
For example, in 2000, Pfizer (NYSE: PFE) acquired Warner-Lambert for $89 billion. But Pfizer didn’t pay in cash. Instead, it gave Warner-Lambert shareholders Pfizer stock.
Makes sense: in 2000, the stock market was at a record high. In fact, Pfizer was trading at about $45 — an all-time high it never hit again. By taking advantage of its sky-high stock price, Pfizer saved itself billions.
And today, with the stock market at new all-time highs, companies are once again leveraging their richly-priced shares for M&A.
Catalyst #3 — Corporate Activism
As J.P. Morgan reported in its 2019 Global M&A Outlook, companies are under pressure right now to “unlock value.”
You see, powerful investors called activists are demanding that companies take action to increase the price of their shares…
And the most “transformative” corporate action is simple: M&A!
So now that you understand why 2019’s “Goldilocks” environment is leading to a record year for M&A, let me start explaining how to profit from it.
Making Money from M&A
To make money from M&A, you need to know which types of companies will get acquired.
Figuring out this part of the equation isn’t difficult.
You see, based on data from market research company CapitalIQ, 95% of all takeovers occur in the same market…
And next week, I’ll tell you exactly what this market is, and how to invest in it.
So stay tuned!