If mergers and acquisitions activity is a good way to gauge where we are in the stock market recovery, activity in the first quarter suggests that the recovery is well on its way but still has a long way to go before it moves into peak territory.
According to mergermarket, an independent analysis firm, global M&A activity rose 28.9 per cent in the first quarter of 2011 compared with the same quarter in 2010 - in dollar terms. That marks the busiest first-quarter since 2007.
However, activity is nowhere near record territory. The total value of deals in the first quarter was $591-billion (U.S.) - far short of the $807-billion of activity in the first quarter of 2007 and about half the record-high in the second quarter of 2007.
M&A activity has followed the path of the S&P 500 quite closely over most of the past decade. That is, activity rose with the index during the bull market that began in 2003. Activity peaked in 2007, roughly at the same time that the S&P 500 hit its high of 1565. Activity then plunged with the devastating bear market in stocks in 2008, bottoming out shortly after the S&P 500 hit a 12-year low in March 2009.