Gabelli Merger Plus (GMP) announced its annual results for the 12 months to 30 June 2024. The company generated a NAV total return of 3.14% for the period while the share price total return was 5.4%, narrowing the discount to 10.4% The company also declared and paid three quarterly interim dividends totalling $0.48.

Discussing the results and the outlook for the company co-chairmen John Birch and Marc Gabelli commented:

“The U.S. economy continues to expand. Some of this is due to productivity growth (thanks to AI), some is due to more workers in the labor force (thanks to workers who left the work force during COVID coming back). Also helping the economy is a huge amount of fiscal stimulus, which unfortunately means the U.S. government is running a deficit to GDP ratio of about 7%, unheard of in an economy near full employment. For now, the stock market does not seem to be concerned about the huge debt levels building up in the economy, but at some point politicians will need to address government debt levels.

“Looking ahead, the trajectory of inflation and the resilience of the labor market will be crucial in shaping the Federal Reserve’s actions. Should inflation continue to trend downward and labor market conditions soften, the likelihood of rate cuts will increase. However, the Fed’s commitment to a data-driven strategy involves careful monitoring of various other economic indicators to avoid premature adjustments that could undermine the progress made so far.

“Yields in the Treasury space will remain influenced by Fed policy and Treasury bill supply. With front-end yields elevated and the Fed still wary of inflation, we expect the investment environment for government money market funds to remain attractive. As with non-government debt, Government and Treasury fund yields have probably peaked and will continue to gradually decline as managers roll maturities into securities with lower yields that are pricing in future rate reductions. Additionally, any large supply changes in Treasury issuance may create yield volatility on the front end.

“We expect M&A activity to remain strong with pent up demand likely to drive transaction announcements. Companies will gain further clarity into the Federal Reserve’s interest rate policy and the upcoming U.S. presidential election’s potential impact to regulatory changes, but perhaps the main issue which buyers and sellers continue to monitor is the more stringent antitrust environment. Within the U.S., the Federal Trade Commission (FTC) continued its watchful eye on deals, requesting additional information from merging parties including the energy and healthcare sectors. Deals continue to close as merging parties are drafting strong merger agreements with additional time to consummate deals, in the event of regulatory delays. The drivers for M&A activity to remain robust over the coming years include the need to compete on a global basis, acquire new technological advancements and enter new and growing business units.

“In the current high-yielding environment, it is strategically advantageous to allocate a portion of the Company’s assets to U.S. Treasury bills due to the numerous benefits they offer. Treasuries stand out for their ability to provide competitive returns when compared to other fixed-income securities and given their short-term nature allows for frequent reinvestment at prevailing interest rates, potentially maximizing the overall yield of the portfolio over time. Moreover, Treasuries are highly liquid and can be easily bought and sold without significantly affecting their value. This liquidity not only enhances the flexibility of the Company’s investment strategy but also allows for swift adjustments in response to changing market conditions.”