Wall Street eyes M&A revival if new Trump administration ushers in lower rates, looser scrutiny

NEW YORK (AP) — Wall Street is betting corporate dealmaking could bounce back next year if the new Trump administration ushers in lower interest rates and looser regulatory scrutiny.

The number of deals and their value are both below pre-pandemic levels. In the U.S., deal values fell 23% in 2023 from just before the pandemic, while the number of deals slumped 20%. The current year is on track for an even deeper slump, according to Dealogic.

That could change thanks to the Federal Reserve loosening its interest rate policy and returning President Donald Trump vowing to slash regulations. Trump's planned cuts to the Federal Trade Commission could also mean less staff scrutinizing antitrust concerns.

“President Trump’s administration is set to continue its push for deregulation across various sectors and existing governmental agencies, aiming to lighten the regulatory load on both the economy and businesses,” said EY chief economist Gregory Daco.

The Fed has cut interest rates twice since September and Wall Street expects another rate cut next month.

The central bank had held rates at historic highs through much of 2023 and 2024. That made mergers and acquisitions more expensive and less attractive.

At the same time, U.S. regulators were closely scrutinizing more proposed deals over antitrust issues, resulting in the delay or scrapping of potentially big deals over the years.

Kroger’s proposed $24.6 billion purchase of rival Albertsons has been stalled since late in 2022. The Federal Trade Commission alleges the deal would eliminate competition and lead to higher food prices.

Amazon walked away from its planned buyout of robot vacuum maker iRobot following scrutiny from U.S. and European regulators. WillScot Holdings, which makes portable classrooms and mobile offices, also scrapped a proposed deal under pressure from regulators.

The White House released updated merger guidelines in late 2023 meant to solidify the Biden administration’s tighter regulatory regime. Officials said consolidation had long run unchecked, diminishing competition and hurting consumers.

U.S. regulators' efforts to break up Google had also raised caution in the industry over entering into deals.

FILE - This July 15, 2013, file photo, shows a sign for Wall Street outside the New York Stock Exchange. (AP Photo/Mark Lennihan, File)

The average rate on a 30-year mortgage in the U.S. eased this week, though it remains near 7% after mostly rising in recent weeks.

The rate slipped to 6.81% from 6.84% last week, mortgage buyer Freddie Mac said Wednesday. That’s still down from a year ago, when the rate averaged 7.22%.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners seeking to refinance their home loan to a lower rate, rose this week. The average rate climbed to 6.1% from 6.02% last week. A year ago, it averaged 6.56%, Freddie Mac said.

Mortgage rates are influenced by several factors, including the yield on U.S. 10-year Treasury bonds, which lenders use as a guide to price home loans. The yield, which mostly hovered around 4.4% last week and was below 3.70% in September, has eased this week. It was at 4.23% at midday Wednesday.

Elevated mortgage rates and rising home prices have kept homeownership out of reach of many would-be homebuyers. U.S. home sales are on track for their worst year since 1995.

“The 30-year fixed-rate mortgage moved down this week, but not by much,” said Sam Khater, Freddie Mac’s chief economist. “Potential homebuyers are also waiting on the sidelines, causing demand to be lackluster. Despite the low sales activity, inventory has only modestly improved and remains dramatically undersupplied.”

Mortgage rates slid to just above 6% in September following the Federal Reserve’s decision to cut its main interest rate for the first time in more than four years. While the central bank doesn’t set mortgage rates, its actions and the trajectory of inflation influence the moves in the 10-year Treasury yield. The central bank’s policy pivot is expected to eventually clear a path for mortgage rates to generally go lower. But that could change if the next administration’s policies send inflation into overdrive again.

FILE - A sign announces the sale of a new home, Jan. 16, 2024, in Kennesaw, Ga. (AP Photo/Mike Stewart, File)