Get Ready for the PE Comeback: A Q&A with BMO’s Brian Belski

As the close of Q1 2025 nears, Brian Belski, chief investment strategist with the Bank of Montreal, is bullish despite the noise around Trump’s proposed policies and resulting market volatility. Belski tells Middle Market Growth how he’s finding opportunities in mispricings and why he thinks 2025 is the year of the private equity comeback.

Register for DealMAX to hear more from Belski, Dan Greenhaus, chief economist and strategist with Solus Alternative Asset Management, and Colin Schopbach, SVP of America sales with Datasite, in their featured session, “The Good, Bad and the Ugly: Learn How Investment Strategists Think New Federal Policies Will Impact Dealmaking.”

Middle Market Growth: There has been a flurry of activity from the Trump administration over the past several weeks that have kept the markets in turmoil. What Trump policies do you think will be most impactful to the middle market, whether negatively or positively?

Brian Belski: I would say, first of all, that we never base investments on politics, period, and I think too much has been made with respect to what’s going to happen in terms of tariffs, or taxes, or regulation or any of that kind of stuff, because what we find particularly troubling is a lot of macro observers, whether or not they’re economists or strategists, are already [treating these] things as an actuality. It’s not just President Trump, by the way; it’s other presidents that come out with statements or do things that ultimately, investors react to, where I think you have to look [more closely at] the underpinnings. So, we would say this: Against a, let’s say, more traditionally conservative backdrop, this notion of less regulation would be positive for the M&A side of things. There’s been some talk—again, no actuality—about President Trump following through with what President Biden was saying on M&A, in terms of tax changes and securing the tax cuts permanently. We don’t know that yet. And so, we’ve said quite frankly in print that you can’t run a marathon and win the race if you don’t know what your time is, and I think that’s where investors are. Right now, we’ve become excessively reactive to all of these headlines instead of really seeing actualities.

Now, do I believe at its core that the United States stock market is the best stock market in the world? Yes, I do. I think we have the best companies in the world. Do I believe that companies can, will and should outperform the broader market in this type of scenario? Absolutely. Do I believe that some areas of the market have been unjustly hurt by a lot of these emotional conclusions? Yes, I do. And so that’s why, as a strategist, an investor and a portfolio manager, we’re trying to take advantage of those mispricings, let’s call [them], to create opportunities. I think investors give politicians on both sides way too much credit for these things. We’ve been in these types of near-term events, where the market sells off early in the day and then comes right back at the end of the day, and that to me says there’s a real lack of strategy, focus and fundamentals. So, this malaise is going to continue until we work through all of these things. It’s still early on.

MMG: As we approach the end of Q1 2025, M&A sentiment is largely positive, and dealmakers are anticipating a big year. What economic markers have been keeping an eye on and what are they telling you about the M&A environment?

BB: I’m not an economist. Everyone wants to try to talk macro; you have to talk micro. I think at the end of the day we view what is going on as more this path to normalization. After two huge years in the stock market, the likelihood of another 20-plus percent gain is not likely. I think that we’re entering into this period where we have double-digit earnings growth, 2-3% GDP [growth],10-year Treasury [yields] around 3.5, 4.5%, and that’s a pretty good environment for stocks. Given the fact that in the small to mid-cap world, in terms of publicly traded companies, there’s a scarcity of companies out there, there’s fewer and fewer publicly traded companies in that small to mid-cap space. And oh, by the way, this is also an asset class that has been hurt for multiple decades now, and as investors seek liquidity in larger cap names when the market begins to rally, I think that ultimately provides an opportunity for these small cap names in terms of M&A activity, not to mention all the private equity companies that we believe have made decent investments the last three or four years that ultimately may have to spin these companies out. I think that there’s a real opportunity in the growth areas of consumer discretionary and communication services and tech and even healthcare going forward. But again, this is the bumpiest road that we’ve seen in the markets since interest rates were going up and we had inflation, and we were all convinced then we were going into a recession. Now it seems like the recession talk is increasing.

This is the bumpiest road that we’ve seen in the markets since interest rates were going up and we had inflation, and we were all convinced then we were going into a recession. Now it seems like the recession talk is increasing.

MMG: Private equity firms spent 2024 sitting on a lot of dry powder and watching the public markets outperform them, but there are signs that things are turning around. Do you think 2025 is a year of the PE comeback or not? Why?

BB: I do, especially given the fact that I do think that the likelihood of interest rates peaking is very high. That’s number one. Remember, private equity feeds on going out and making these deals and you do have to finance these deals. You have a situation where a lot of private high-net-worth investors have turned to private equity as their alternative [investment] versus hedge funds, and the reason is that hedge fund performance has not been great, but private equity from a longer-term perspective could tell that story.

Now, with respect to the public markets, I still believe that what we’re going to see is more and more M&A activity within the small to mid-cap universe, or very pointed areas in terms of AI or the consumer. You saw Walgreens get bought out over the weekend—things like that, assets that have been underperforming, you’re going to see more kind of M&A activity there, but in terms of the broader themes of AI and things like that that will obviously still have a lot of demand.

This interview has been lightly edited and condensed for clarity.

Hilary Collins is ACG’s Associate Editor.

Middle Market Growth is produced by the Association for Corporate Growth. To learn more about the organization and how to become a member, visit www.acg.org.