Strong corporate earnings bolster upbeat assessment of capital market conditions
The outlook for corporate earnings and credit availability remains strong. These are two key ingredients for a robust M&A market. In contrast to many market commentators, executives are looking at their own fundamentals and seeing a brighter outlook for capital markets.
The relatively small decline in these measures sends an important message — the underlining confidence in growth and economic outlook outweighs fears resulting from ongoing public negotiations around trade and geopolitical tensions.
Executives are navigating a wide range of external issues that could hamper growth
From political uncertainty to geopolitical tensions and currency volatility to rising protectionism, executives have a broad array of external threats to navigate. While the impact of increasing tensions on the political stage has unsettled the wider capital markets, any destabilizing effects have yet to be felt in corporate earnings or optimism about the economy.
Rising geopolitical tensions and increasing electoral share for populist parties are a concern for businesses. With policy becoming harder to predict, nearly half of executives see policy uncertainty as a key risk to their business and a similar number cite geopolitical tensions.
The US has been vocal over the past few months about its desire to reimagine the global trade system. If protectionism increases, it could interrupt the efficient flow of goods and services between countries.
Executives are also concerned about disruptive forces, including technology, digital transformation, sector blurring and changing customer behaviors, that could have a more immediate impact on their business. Understanding the broad swath of external risks enables executives to understand the transformations needed within their own ecosystems. This will better enable them to survive and thrive in a fast-changing environment.