Investment professionals are considerably more upbeat about global growth compared to CEOs. Investors are however more reserved than business leaders when it comes to short- and medium-term revenue growth, fearing a range of factors that may impact growth – top threats include geopolitical instability and protectionism.
In a new study from PwC, the accounting and consultancy firm asked investment professionals about a range of key trends affecting their sector. The study involved 554 respondents from nearly 60 countries.
The results show that investment professionals are increasingly positive about global economic growth prospects, this year outstripping the opinions of CEOs and their own more pessimistic views from last year.
This year, 45% of investment professional respondents predict that global economic growth will improve over the coming 12 months, up from 22% who held the view a year previous. Investors also appear to be considerably more confident than CEOs about economic growth prospects, with 29% saying that economic growth will improve.
Investment professionals, when they are pessimistic, outnumber pessimistic CEOs, at 19% and 17% respectively. The number of pessimistic investment professionals has dropped significantly on last year, when they stood at 41%.
Regarding the sentiment of investment professionals around the world, Richard Sexton Vice Chairman at PwC comments that they are “remarkably upbeat about global economic growth prospects, despite recognising the shifting political landscape in which companies operate. They certainly don’t expect the globalization process to stop or be reversed. Like CEOs, investors think it is becoming harder for business leaders to balance competing in an open global marketplace with trends toward closed national policies.”
Confidence in revenue growth over the next 12 months too has also increased on last year under investment professionals, with 23% saying that they are very confident vs. 13% last year. The number that say that they are somewhat confident too has risen, up from 53% to 55%. Number of respondents not confident at all has fall to 2%, down from 5% last year. CEOs, overall, remain more confident than investors about growth prospects.
The longer-term picture, revenue growth projected over the coming three years, is similar to the year previous. Around 30% of investors were very confident both years, and around 50% of investors were somewhat confident both years. A similar trend is found for CEOs.
In terms of a sector breakdown for medium term growth prospects, in terms of a % of respondents answering somewhat confident or very confident, generalist CEOs are considerably more confident than investment professionals, at 91% and 79% respectively. In basic materials however, investors are considerably more positive than CEOs, at 100% and 85% respectively.
Few industries see considerable medium term discrepancy between investors and CEOs, with an around 10% difference, in favour of CEOs, noted in financials and technology. The biggest discrepancy between the groups was noted in oil & gas, where CEOs remain relatively positive about the medium-term outlook, at 84%, while investors are much more concerned, 59% stating some form of confidence. Regarding shifting expectations from investors, Sexton writes, “Investors and analysts want companies to understand the markets they enter, act in socially responsible ways and support local economies.”
In terms of key threats to growth, investors continue to be considerably more concerned than CEOs about global geopolitical uncertainty, stoked by the recent change of Administration in the US, Russian interference in the Ukraine and the annexing of the Crime as well as wider concerns around populism in Europe and Brexit contagion.
Protectionism too is cited as a key concern for investors, at 78% of respondent vs. 59% of CEOs, particularly the Trump administration’s rhetoric as well as concerns around Brexit, are putting the wind up investors. Brexit has potential knock on effects in Europe as populist parties and leaders ply for their respective countries to leave the Euro zone, or the EU as a whole. While Greek debt crisis continues to simmer, as the can is kicked further down the road.
Other areas seen by investors as a threat to growth include social instability (at 73% of investor respondents), in part from global level events, from forced migration to structural inequality, may see old realities falter. Cyber threats too are considered a problem by investors, at 73% of all respondents, and a somewhat higher number than CEOs, at 61%.
Trust in brands is increasingly seen as important for customer retention, as a number of different technologies intersect to improve a range of transparency touchpoints across consumer decision making processes.
In terms of the biggest threats to trust between organisations and stakeholders over the next five years, cyber security ranks number one among investor professionals and CEOs, at 92% and 91% respectively – most of the respondents (90%) note that something is being done about it. A breach of data privacy and ethics takes second place, cited by 91% of both groups of respondents as a possible threat, most companies too are working on the issue.
Social media as a risk to trust is noted by 87% of CEOs as a potential risk, compared to 73% of investor professionals. The areas of least concern for trust include gene technologies – although considerable ethical and social implications exist in the arena that may see the technology banned – as well as uncertainties around tax laws applying to digital assets.