Market Environment

Market Environment

Economic fundamentals generally remain strong globally. We continue to see good availability of liquidity in debt markets, and inflows into our fund strategies have been robust. This is all playing out against a backdrop of political upheaval and the reality that we are in the late stages of the business cycle, and therefore will likely see a recession at some point in the next few years.

The U.S. economy, while slowing from the pace in late 2017 and early 2018, continues to be strong. Interest rates are still historically low and we expect that to continue. The stock market took a welcome pause at the end of 2018 which brought rationality back to the equity markets. In the context of this backdrop and amidst these conditions in 2018, we found a number of great businesses to acquire.

Economic momentum in Europe has been slow for some time due to uncertainty over Brexit, Italy’s budget deadlock with the EU, and long-term structural issues. We expect activity to be better once the outlook on Brexit becomes clearer, but in the meantime, we believe there will be select opportunities to deploy capital.

Canada and Australia are exceptional long-term markets for investment and while they are small on a global basis, both are very important to us, given our major presence in each. We believe they will continue to be excellent markets for us, given their stability and resilience. In 2018, we were successful on a number of fronts in both countries.

The South American markets in which we invest have been recovering nicely, with Brazil the slowest, but are set to recover now that a new government is in place. We invested significant capital in South America over the past three years and will both continue to tuck-in assets around these businesses and monetize investments as the currencies and economies recover.

Asia continues to increase its importance in the global economy. While trade issues have been disruptive in the short term, and growth is slowing due to the law of large numbers, these countries are very important global investment markets. We continue to judiciously increase our investments in India, China, Japan and South Korea.

Bruce Flatt,

Excerpt from Brookfield Asset Management’s Quarterly Letter,

February 14, 2019