Stocks reached record highs through mid-2024, boosted by hopes of productivity gains stemming from Gen-AI. More recently, markets have experienced turmoil due to investor fears of a possible recession and over-optimism regarding earnings improvements from Gen-AI. In addition, the U.S. is heading into Presidential elections, creating additional uncertainty for businesses and consumers. Failure to address the growing U.S. Federal debt burden and large budget deficits could place upward pressures on long-term interest rates. Meanwhile, major central banks are at a crossroads on the pace and magnitude of future interest rate cuts. These headwinds mean that companies are now facing a higher cost of capital that matches the levels last seen during the 2008-2009 Global Financial Crisis.
Kroll’s managing director Carla Nunes and director James Harrington discussed the latest economic and financial market developments that have an impact on valuations and cost of capital estimates.
