January Market Intelligence: The Year Capital Stops Pretending

This year will not reward optimism, speed, or narrative. It will reward structure, balance-sheet realism, and disciplined aggression. Capital is no longer plentiful, forgiving, or patient. It is selective, conditional, and increasingly hostile to weak operators. January is not about forecasting upside; it’s about identifying who will still have access to capital when conditions tighten again.

The market is entering a separation phase. Credit terms, refinancing access, and deal structure will determine outcomes long before earnings headlines catch up. Those who prepare early will dictate terms later. Those who wait will negotiate from weakness.

Macro Snapshot: Disinflation Slows, Policy Turns Tactical

Headline CPI is currently running ~2.7–2.9% YoY, while Core CPI and Core PCE remain elevated near ~3.0%. Services inflation, driven by wages, housing, insurance, and energy-linked inputs, remains the core problem. Goods disinflation has largely played out.

The Federal Reserve is signaling additional rate cuts in 2026. The market is pricing a cumulative 50–75 bps of easing, with debate centered on a 25 bps incremental approach versus a front-loaded 50 bps cut if labor softens materially. This is controlled easing, not stimulus. Policy is shifting from restrictive toward neutral, not accommodative.

Treasury markets reflect this tension. The 2-year is hovering near the low-4% range, while the 10-year remains volatile in the 4.1–4.4% band, sensitive to inflation surprises, fiscal deficits, and geopolitical risk. Expect episodic volatility, not a clean trend.

Credit Markets: Liquidity Exists, Forgiveness Does Not

Credit markets remain functional but structurally tighter. Investment-grade spreads are holding near 100–120 bps over Treasuries, allowing strong issuers to term out maturities. High-yield remains bifurcated: BB spreads ~300–350 bps clear with structure, while single-B credits push north of 450–600 bps or require equity support.

Private credit continues to dominate middle-market financing. Typical unitranche pricing sits at SOFR + 550–700 bps, often with SOFR floors of 1.0–1.5%, OIDs of 2–4 points, and tighter EBITDA definitions. Covenant-lite is increasingly rare outside top-tier sponsors.

The 2025–2027 maturity wall remains the primary pressure point. Rate cuts create refinancing windows, not solutions. Sponsors are actively executing amend-and-extend transactions, layering NAV facilities, and using continuation vehicles to buy time. Distressed desks are preparing loan-to-own strategies where documentation allows.

M&A and LBO Outlook: Structure Over Speed

M&A activity is expected to accelerate selectively as dry powder pressure intensifies. Global private equity dry powder remains north of $2.0 trillion, but deployment is disciplined. Buyers are prioritizing certainty, downside protection, and post-close control.

Middle-market deal sizes ($25M–$500M enterprise value) remain the most active. Targets with recurring revenue, low capex, and mission-critical services are commanding attention, particularly in infrastructure services, specialty logistics, industrial services, healthcare services, and B2B software.

LBO leverage is available, but rationed. Typical leverage ranges from 4.5x–6.0x EBITDA for quality assets, with equity checks often 45–60% of total capitalization. Winning bids rely on earnouts, seller notes, preferred equity, and rollover structures to bridge valuation gaps.

Policy & Tariffs: Manufactured Noise, Real Economic Drag

Inconsistent tariff messaging and trade policy uncertainty continue to distort planning and pricing. Import-heavy sectors, consumer goods, electronics, industrial components, face margin compression, inventory pull-forwards, and volatile landed costs.

Large enterprises can absorb this friction through scale and diversification. Mid-market operators cannot. Expect increased distress among businesses with rigid sourcing, weak pricing power, and limited access to flexible capital. Tariffs are not politics, they are an operational tax.

Looking Forward: Aggressive Institutional Discipline

This is a year for disciplined aggression. Capital will flow toward operators who treat leverage as a tool, liquidity as a weapon, and structure as strategy. Distressed credit, structured equity, and selectively leveraged acquisitions will define opportunity.

Strategy Signal

In a market full of noise, winners move quietly. They negotiate early, structure defensively, and strike decisively when dislocation appears.

Talk less. Move faster. Win bigger.