Legendary investor Mario Gabelli has predicted that 2018 will be a bumper a year for corporate mergers and acquisitions (M&A) but that there will also be a 20% market correction following an initial hot run for stocks.
‘I can’t tell you what will go wrong but I know something will go wrong and the market will have a 20% correction,’ Gabelli told Citywire Americas sister site Citywire USA.
‘My concern is we are going to get too hot in the early part of 2018 because tax rates are coming down, the financial stocks are going to go up, cryptocurrency is hot, and something goes wrong.'
Gabelli emphasized that he was not bashing the cryptocurrency itself but that its popularity showed an appetite for speculation among investors, as seen in the junk bond boom of the 1980s, the tech bubble of 1999, and the housing market of 2008, all of which preceded steep corrections.
‘It [bitcoin] is talked about on every college campus,’ he said. ‘You have stoked the juices of speculation.’
Gabelli is chief executive, chairman and founder of Rye, New York-based Gabelli Asset Management Company Investors, which had $43.1 billion in assets as of November 2017.
M&A on the way
Gabelli also predicted that 2018 would be a year of record M&A activity, fueled companies repatriating cash held oversees as a result of a measure in the Republican tax plan.
‘Once we know what it means to repatriate cash from non US, we’re going to see [such] a huge number of M&A activity over the next 12-months that you’re going to go dizzy,’ Gabelli said.
‘There’s going to be we as big as you saw when Milken was around in 1986 or 1987 and again in the technology, media and telecom world.’
He said deals would not be limited to smaller companies, with mega caps likely to be buying too.
‘Pfizer buying Bristol-Myers… those are not small companies,’ he said.