U.S. Economic Outlook: Investor Caution Amid Election Uncertainty

By Nupur Anand and Pete Schroeder

WASHINGTON (Reuters) – Questions about the direction of the United States and the ongoing wars in Ukraine and the Middle East are causing caution among investors, according to bank executives gathered in Washington.

However, there is optimism that economic activity will improve as policy clarity emerges following the Nov. 5 U.S. elections.

"The uncertainty around the election has people kind of on a pause basis," said Wells Fargo CEO Charlie Scharf.

He added that businesses are holding off on loan demands and decisions until they better understand the post-election landscape and new policies.

Investment bankers and lawyers reported that companies are delaying major transformational deals until after the presidential election for more certainty about regulatory and economic policies under a new administration.

BNY CEO Robin Vince concurred, noting clients prefer to wait for clarity before making significant decisions.

The election pits Democratic candidate Vice President Kamala Harris against Republican former President Donald Trump in a closely contested race.

The election's outcome will impact various domains, including fiscal, trade, and tech policies, as well as international relationships, which concern investors, according to Tim Adams, CEO of the Institute of International Finance.

Ongoing wars in Ukraine and the Middle East add to this uncertainty, keeping investors cautious. JPMorgan Chase CEO Jamie Dimon remarked, "It may diminish over time … but it may not. Mistakes happen, look at how we tripped into World War Two."

The International Monetary Fund noted that half of the world's population will elect new governments in 2024. The unclear policy plans of these new leaders may carry significant economic consequences.

Wall Street executives express concerns that Trump’s proposed import-tariff hikes could reignite inflation, while his tax cuts could increase the U.S. deficit.

Looking ahead, bankers are hopeful for a resurgence in demand and investment after the elections. "I do think there will be some pickup of investment post the election," said Santander's executive chairman Ana Botin.