Highlights from SIFMA’s 2025 State of the Industry Briefing

The State of the Industry and Outlook for 2025

On Tuesday, January 21, SIFMA hosted our annual State of the Industry Briefing. We recapped key trends in the capital markets in 2024 and shared our outlook for 2025, including an overview of SIFMA’s priorities on behalf of our members in the year ahead.

I was joined by Laura Chepucavage, Chair of SIFMA’s 2024-2025 Board of Directors. Laura serves as Head of Global Financing and Futures, Global Rates and Counterparty Portfolio Management at Bank of America.

You can watch a replay of our wide-ranging conversation and download a copy of our 2025 Capital Markets Outlook. Below are some highlights related to both market performance and policy developments that I’d like to share.

2024 Market Performance

2024 was another strong year for U.S. markets, which remain the deepest and most liquid in the world.

Equities Markets

In 2024, the S&P 500 returned an impressive 23.3%. That followed a 2023 return of 24.2%. We have not seen two 20% plus return years for the S&P 500 since the 1990s, and that phenomenon has only occurred four times going back to the 1920s.

Equity volumes grew significantly as well. Equity average daily trading volume (ADV) was 12.2 billion shares in 2024, +10.2% Y/Y. This moved the annual average up over the 12 billion shares threshold.

As for volatility, the VIX was able to push through negative news, events, and data releases last year. The average VIX for the year was 15.61, in line with pre-COVID historical averages. This lower level occurred despite having pockets of elevated volatility related to not just FOMC meetings but also the unwinding of the carry trade, heightened geopolitical tensions, poor tech stock earnings, the hurricane aftermath – which really equates back to economic data – and pre-election jitters.

Capital Formation

In 2024, IPO deal value was $31.3 billion. This was significant growth, +55.8% Y/Y, and moving closer in line with the historical average of $48.7 billion (going back to 1990). However, it is certainly well below recent peak years such as 2020 and 2021. Looking at average IPO deal value across decades, excluding the COVID era (2020-2021), the 2024 level ranged from -29.0% to -36.3% to the decade averages for the 2000s and the 1990s, respectively. Now that we have three years of data in the post-COVID era, we can analyze this trend as well: 2024 deal value was +56.7% to this $20.0 billion average.

After returning to the 6,000 level in 2021 with 6,174 listed operating companies, the number declined last year to 5,455, -4.4% Y/Y. This marked the third year of Y/Y declines in a row, albeit last year’s decline was less than that of the prior year.

Fixed Income

Treasury issuance continued its upward trajectory in 2024 growing 32.8% YOY, Treasury ADV ended over $900 billion, a 19% increase. In fact, seven out of twelve months were up over this level, and August was over $1 trillion.

Corporate bond issuance was up 30.2% YOY with investment grade up 24.9% and HY up 64.3%.  This came after a fairly muted 2023. Issuance was just south of $2T, a level not reached since 2021. ADV was plus 21% YOY. ADV averaged over $50 billion in 2024.

Looking at a few other asset classes, municipal bond issuance was up 31.8% YOY with trading volume averaging $13.2 billion, essentially flat versus the prior year (-0.1%). MBS issuance was up 21.4% and ABS issuance was +39.4% Y/Y.

The Economy

This past December (just prior to the last FOMC meeting), we released SIFMA’s twice-annual survey of our Chief Economist Roundtable. Notably, the probability of recession has come down from our June survey, with almost half of economists seeing a 0% to 15% probability of recession. Last survey, over 40% of economists saw a 0% to 15% and another 40% saw a 15% to 30% probability.

Overall, real GDP growth is expected to decrease to 1.9% in 2025, inflation should continue to recede to 2.4%, and the Federal Reserve is expected to cut rates by a total of roughly 100 bps by end of 2025.

Policy and Regulatory Matters

Policy and regulation affect the smooth functioning of our capital markets. Here are some of the biggest takeaways from 2024 and where we see things heading in 2025.

The move to a T+1 settlement cycle in May 2024 was a success.

Notwithstanding the rulemaking agenda, by far, the biggest event for markets in 2024 was the T1 conversion. This was a major industry undertaking over a three-plus year period. SIFMA, ICI, and DTCC first began working on accelerating settlement from two days after trade date (T+2) to one day after trade date (T+1) in 2021, intending to reduce settlement risk across U.S. capital markets. The transition was successfully completed over Memorial Day weekend.

The policy and regulatory landscapes are changing.

This last year – and the Administration – was marked by a prolific rulemaking agenda. In many cases, in part due to strong advocacy efforts, many major rules we cared about were modified or did not proceed.

We have a new administration, new Congress, and new heads of the regulatory agencies. What will it all mean? It would seem now that the new Administration plans to pause much if not all of the pending rulemaking (including approximately 20 pending SEC rules alone) and review others that went final. We expect, based on public statements, the new Administration will take a far different posture toward regulation and rulemaking.

We will continue to focus on key issues, such as a more rational capital and liquidity framework. This must recognize the dramatic changes since the global financial crisis in terms of quantity and quality of capital in the system. It also must recognize the important role that large banks play in the capital markets space, which is critical to the potential growth of the U.S. economy and the continued evolution of our markets, in terms of equity markets, private markets, growth of the retail investor base, and product offerings. We must always ensure that our robust regulatory architecture remains consistent with market evolution.

We certainly will be focused on where Congress and the Administration go on issues such as digital assets, and while much of our work has been around tokenized securities (RSN) our members are interested in how the rules and market will develop for native digital assets, particularly as it relates to the role of broker-dealers, banks and registered investment advisors.

And of course, we will be watching what Congress does with respect to the forthcoming tax legislation and how that might impact the financial services industry.

We cannot lose sight that we still have much to do with recently adopted rules such as Treasury clearing and securities lending.

Treasury securities play a key role in the U.S. and world economies. SIFMA has long supported efforts to make the Treasury market more resilient. At the same time, we recognize the need to ensure liquidity is not negatively impacted.

The SEC finalized its expanded mandate for central clearing in the Treasury market in December 2023. It increases the scope of transactions that are required to be cleared in both the cash market and the repo market.

The current timeline for compliance is aggressive:

  • March 31, 2025: Covered clearing agencies (CCAs) must implement enhanced practices, including risk management, margin, and customer asset protection.
  • December 31, 2025: Direct participants of CCAs must clear eligible cash secondary market transactions.
  • June 30, 2026: Direct participants of CCAs must clear eligible Treasury repo transactions.

In September SIFMA published standard clearing documentation, for “Done-With” transactions and is also working on standard documentation for “Done-Away” style transactions which should be published early this year.

In November SIFMA, along with EY, published an Industry Considerations Report which includes an overview of the SEC’s mandate and discusses next steps for the industry to meet the timeline for implementation.

SIFMA is also working with its members and regulators on getting answers to the numerous interpretive questions that have arisen on both the buy and sell side, as well as with operations constituencies to understand what must be done from an operational capability side to move this along.

What do we see on the horizon?

In a nutshell, changes to tax policy are a certainty and the new policy agenda – whatever that may turn out to be – will shape our year.

We expect continued focus on SEC rulemaking – including the Consolidated Audit Trail, Equity Market Structure, One-Minute Trading Reporting, Rule 15c2-11, SAB Rul 121, and more. Other topics of note include cybersecurity, e-delivery, the DOL Fiduciary Rule, senior investor protection and bank control rules. In addition, we’re continuing work on the Regulated Settlement Network, an industry proof-of-concept that has demonstrated use of shared ledger technology to upgrade liquidity management and financing for domestic users of U.S. dollar and U.S Treasury securities.

SIFMA priorities remain constant. We continue to advocate on legislation, regulation, and business policy on behalf of our members, and to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency.

Watch On Demand: SIFMA’s State of the Industry Briefing

Author

Kenneth E. Bentsen, Jr. is President and CEO of SIFMA. From 1995 to 2003, he served as a Member of the United States House of Representatives from Texas. Prior to his service in Congress, Mr. Bentsen was an investment banker specializing in municipal and housing finance.