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Macroeconomic environment

Global Capital Confidence Barometer | 16th edition

Confidence is resurgent as executives see the global economy improving and corporate earnings on an upward track.

Our survey finds executives bullish about the global economy. A recent pickup in economic indicators and very positive Purchasing Managers’ Index results are driving a strong upturn in the number of executives who see the global economy improving.

While this outlook may give a boost to companies’ existing operations, it is also elevating investor expectations, as targets for earnings growth in 2017 are elevated across all markets. To meet these stretched targets, companies will look to capture this incremental organic growth and compound it with dealmaking strategies.

Q: What is your perspective on the state of the economy today?

Macroeconomic environment

A positive shift in outlook and a greater sense of stability in capital markets should foster investment

With corporate growth expected to accelerate, credit readily available and valuations seen as improving, companies should feel comfortable accessing capital markets to support investment and M&A strategies.

There is a strong shift in views toward short-term market stability, with the vast majority of respondents seeing the markets as stable in the near term. This relative stability should reassure executives that they do not need to rush into fundraising or refinancing, as capital markets remain accommodative to growth.

Geopolitical unrest and potential for currency uncertainty are seen as key risks to economic growth

Risks to companies’ core business models remain, but with a slightly different complexion. Concerns about rising nationalism have transformed into uncertainty about policy. Previous fears about a slowdown in global trade have translated into uncertainties about new barriers being raised.

Government intervention and policies — from trade to the movement of labor — now collectively top the macroeconomic concerns of global executives. Leading companies are more carefully accessing geopolitical risks and seeking the advice of outside experts to navigate these issues.

Related concerns about the potential for a slowdown in global trade and an increase in protectionism are likely related to uncertainty about the US Government’s trade policy, coupled with ongoing uncertainty about United Kingdom (UK) Brexit negotiations with the European Union (EU). Potential large-scale policy shifts are front of mind for many executives.

Market volatility also remains on C-suites’ radar. Any return to the high levels of volatility that perpetually shocked markets over the past three years would be a major concern for companies. In relation to historical norms, equity markets are currently high, commodities stable and volatility across asset classes low. But companies always remain wary of a return of high volatility and its impact — slowing decision-making and curtailing investment strategies.

Q: What do you believe to be the greatest economic risk to your core business over the next 6–12 months?

Macroeconomic environment