The resilience of the US economy over the past year is noteworthy, with consumer spending holding steady despite increased prices and interest rates. Businesses have navigated uncertainties without pushing the economy into a recession. Although US stock markets show a slight decline in the third quarter, the S&P 500 remains positive for the year.

The tech sector has been a key driver of gains, particularly due to the robust performance of a select few artificial intelligence (AI)-related stocks. On the flip side, capital raising activities through IPOs and debt in the US have been relatively subdued, indicating a cautious investor approach. Nevertheless, there is growing anticipation surrounding the potential reopening of the IPO window as several notable companies consider public offerings.

The third quarter witnessed an acceleration in US economic growth, propelled by sustained consumer strength and a recovery in factory activity. However, PwC anticipates that this acceleration may be short-lived due to delayed responses to higher borrowing costs, reduced savings, and emerging risks such as the auto workers' strike and a potential government shutdown. Although the Federal Reserve is nearing the end of its rate hikes, the tight labor market and high wage pressures leave room for further rate hikes.

While a near-term recession seems unlikely, PwC predicts a slowdown in US growth next year. The baseline expectation is for real GDP growth to exceed 2% in 2023 but to decrease to approximately 1.5% in 2024.

After six quarters of limited IPO activity, the third quarter showed modest signs of life, marked by successful IPOs from well-known companies. Investors remain focused on profitability and cash flow, indicating that companies pursuing "growth at all costs" may still encounter challenges in accessing the market. A semiconductor giant initiated one of the largest tech IPOs in the past two decades, and in recent weeks, two tech unicorns and two biotechs also publicly filed. If returns hold and market conditions continue to improve, early 2024 may witness more IPOs.

Optimism is also present in the debt markets, with issuance predominantly favoring higher-rated credits and secured borrowing. Banks have successfully sold off most of the debt from the 2022 leveraged buyouts (LBOs), providing them with increased capacity to underwrite new deals. With clearer visibility into the end of the Fed's tightening cycle, the market is poised for an upswing in merger and acquisition (M&A) and LBO announcements.