Election Uncertainty Impacting Corporate Investments

By Howard Schneider

Overview

Nearly a third of financial officers are delaying investments due to risks surrounding the Nov. 5 U.S. presidential election, signaling potential short-term economic growth challenges.

Survey Findings

A survey by the Atlanta and Richmond Federal Reserve Banks and Duke University’s Fuqua School of Business revealed:
– 21% of CFOs reported postponing investments due to election-related uncertainty.
– 15% scaled back plans.
– Overall, 30% indicated that election-related uncertainty affected their investment strategies, while over 64% reported no impact.

The firms most impacted by this uncertainty were less optimistic regarding their outlook and less inclined to invest for capacity improvements or asset repairs. They were more focused on cost-reduction initiatives.

Future Outlook

These firms do not anticipate recovering from slower growth in 2025. Despite this, the CFOs surveyed expressed optimism about their companies, with 69% being bullish on their own business and 60% on the U.S. economy overall, similar to the second quarter results.

Political Concerns

The contentious political climate and the choice between Democratic candidate Kamala Harris and Republican challenger Donald Trump have caused some companies to hold back their investments.

No partisan questions were included, but when asked about policy concerns, CFOs indicated that:
– 60% were most worried about regulatory policy.
– 59% were concerned with monetary policy.
– 54% cited corporate tax policy.

Monetary policy has been the primary concern for over a year, especially with the Fed’s restrictive interest rates aimed at combating high inflation. The Fed recently began cutting rates. Inflation concerns have decreased, with only 8% of CFOs listing it as their top worry.