Confidence among the management of the world’s largest companies has reached its highest level since 2014 reversing a slide reported last year, new research has found.
Fidelity International’s 2017 Analyst Survey found that despite all the political uncertainty over Brexit, elections in the Netherlands, France and Germany, Donald Trump’s rise to power and China’s slowdown, executives running big businesses around the world are upbeat on their money-making prospects.
Last year’s edition of the survey found there was a drop in confidence among senior executives between 2015 and 2016, but this has flipped back the other way.
Prime Minister Theresa May is about to fire the starting pistol on formal Brexit negotiations but company executives remain confident overall
The survey is extensive, encompassing 146 equity and fixed income analysts, whose views are collectively informed by around 17,000 meetings with corporate decision makers.
In all regions corporate confidence was higher on Fidelity’s scale, with 83 per cent of analysts saying management confidence is stable or rising overall and 94 percent of analysts saying dividends will be maintained or raised.
‘When we wrote our report last year, we were reasonably optimistic that the world economy would avoid going into recession,’ said Martin Dropkin, director of research for fixed income at Fidelity International.
‘But it seemed a close call. Markets were jittery, energy and financial stocks were sliding and concerns about China had been mounting.’
‘However, since our last survey, political changes have taken much of the world on a new path. With the oil price lows now behind us, oil-price sensitive sectors and regions are bouncing back strongly from last year’s lows,’ he added.
‘This, combined with evidence of modest demand growth and continued innovation across sectors, is driving higher levels of investment and activity, which has also been reflected in firmer macroeconomic data. As a result, corporate fundamentals are now seen to be improving everywhere – in all regions and sectors.’
There was a note of caution from Fidelity however with analysts noting that Brexit is weighing on companies’ willingness to invest in the UK specifically, and the asset manager noted protectionism is ‘viewed with suspicion everywhere.’
The possibility of an unexpected win for anti-EU candidate Marine Le Pen in the upcoming French election has not significantly dented corporate confidence according to the survey
‘All investment views carry risks – while our ‘base case’ analyst outlook is clearly positive, it is the job of our analysts to continuously adapt and re-test their investment theses when there are meaningful changes in the environment,’ Dropkin said.
‘Encouragingly, there are few signs that political risk is genuinely holding companies back. Our analysts are not oblivious to the many political challenges that face the world, but generally they do not see these weighing on company investment decisions, with the noted exception of Brexit.’