Mix of concern and optimism driving U.S. business sentiment
The major issues affecting U.S. business sentiment this year are the risks to the global economy associated with the UK’s withdrawal from the EU and the impact of Amazon on the competitive environment.
In Nexia International member firm CohnReznick’s latest annual survey of U.S. business leaders and investors1, 22% said Brexit and Amazon issues top their list of worries.
On a positive note, the survey indicates increased confidence in meeting financial goals in 2019, with optimism standing at 81%, up from 79% previously.
Issues on business leaders’ minds
The long-running uncertainty around the eventual outcome of the Brexit negotiations is expected to have wide-ranging effects on the finance, real estate, and other sectors of the global economy, according to the business leaders surveyed.
However, some of the fallout from Brexit could be positive for the European operations of U.S. companies and some sectors of the U.S. economy in the medium term.
While Amazon’s decision not to locate its new headquarters in New York will have an immediate impact, the company’s aggressive posture remains a continuing source of uncertainty.
Amazon is bringing transformative change to the consumer goods market, where it is developing its own product lines, as well as to medical care, where its venture with Berkshire Hathaway and JP Morgan Chase could be game-changing.
Amazon is also expected to extend its reach into pharmacies, package delivery and logistics, and almost certainly in other areas too.
Wider foreign investment scrutiny
A less well-publicised issue, cited by 25% of survey respondents, concerns the Committee on Foreign Investment in the U.S. (CFIUS), which has approval jurisdiction over new foreign investments.
CFIUS was given additional powers and a broader mandate by Congress last summer and has since quashed several high-profile transactions, including the proposed takeover of the MoneyGram funds transfer company by Chinese electronic payments operator Ant Financial.
Concerns focus on how the deteriorating relationship between the U.S. and China may play out, while new legislation means financial transactions from many countries may be scrutinised more closely, making approval more difficult and time-consuming.
Tech worries remain
Cybersecurity is clearly a concern, with nearly 70% of business leaders in the CohnReznick’s survey believing their companies are likely to be attacked, while only 26% said they were adequately protected. Respondents also expressed concern over the best ways to effectively leverage their digital assets.
The wider outlook
Overall, the outlook for 2019 is mixed, with just over half of companies saying they expect valuations to decline this year, in contrast to 2018 when 75% expected them to increase.
Yet most believe 2019 could also be the year to pursue growth initiatives, with 68% saying the next 6 to 12 months is a good time to pursue acquisition, and 89% a good time to raise capital.
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1 Survey of 80 business leaders and investors at CohnReznick’s annual Liquidity & Capital Raising National Forum published in November 2018