By Howard Schneider
A recent survey conducted by the Atlanta and Richmond Federal Reserve Banks and Duke University's Fuqua School of Business has revealed that nearly a third of company financial officers have delayed or scaled back investment plans due to risks surrounding the upcoming U.S. presidential election on Nov. 5. This could potentially have a short-term negative impact on economic growth.
According to the survey, 21% of 479 responding CFOs stated that their companies had postponed investments due to uncertainty related to the election, while slightly over 15% said they had scaled down their plans. Overall, 30% of the respondents reported that election-related uncertainty had affected their investment plans in some way.
Atlanta Fed economist Meyer and survey director Daniel Weitz noted that companies most affected by election uncertainty tended to be less optimistic about the outlook and were less likely to invest in increasing capacity or replacing existing assets. These firms were more inclined to invest in equipment and structures/land for cost-reduction purposes.
Despite the concerns, the survey found that CFOs remained optimistic, with 69% bullish on their own company and 60% optimistic about the U.S. economy overall. However, a significant share of firms appeared to be holding back investments due to the country's combative politics and the stark choice between Vice President Kamala Harris and former President Donald Trump.
While the survey did not delve into partisan preferences, around 60% of CFOs cited regulatory policy as their chief concern in the context of the election, followed by monetary policy and corporate tax policy.
Monetary policy has been a top worry for CFOs for over a year, coinciding with the Fed's efforts to lower interest rates to combat high inflation. The recent rate cuts have alleviated concerns about inflation, with only 8% of CFOs mentioning it as their top concern.
Analysis:
The survey results indicate that the uncertainty surrounding the upcoming U.S. presidential election has led to a cautious approach among company financial officers, impacting their investment decisions. This could potentially hinder economic growth in the short term. The concerns around regulatory, monetary, and corporate tax policies highlight the importance of political stability and clear policy direction for businesses. As investors, it is crucial to monitor these developments and adjust investment strategies accordingly to mitigate risks and capitalize on opportunities.