Wall Street favorite Scott Bessent is likely to become the new US Treasury secretary, which will benefit private equity and business development companies (BDCs). As a proponent of financial deregulation and increased lending, Bessent’s appointment is expected to make M&A easier and faster, boosting private firms.
The extra cash flow from increased M&A activity will exacerbate inflation, already sticking. Fed Chair Powell may not receive the rate cuts he had hoped for, as the bond market has signaled that cuts are not needed, causing yields to rise. This environment is challenging for bond investors but ideal for BDCs and big yields.
BDCs provide debt, equity, and other finance solutions to small businesses, filling the gap left by banks. They benefit from a friendly regulatory environment, similar to private equity firms. Investing in BDCs like VanEck BDC Income ETF (BIZD) offers an 11% dividend with diversified exposure across 29 companies.
While price volatility exists due to poorly run BDCs, investors can still profit by timing their entries. With the new Treasury secretary and Fed Chair Powell’s actions, the private lending party is on. Small business financing is back, and BIZD is poised for gains.
Source: https://www.forbes.com/sites/brettowens/2024/12/01/scott-bessent-appointment-makes-this-11-yield-a-screaming-buy