Capital Markets: Observations and Insights Autumn 2019

​ The Good, the Bad, and the Ugly

ECONOMY

The Bad – Confidence Waning

• Economic policy uncertainty is extremely high and is weighing on business confidence

• As a result, capital expenditure growth has moderated significantly

…Weighing on Capital Expenditures

Uncertainty Is High…

350

140

15%

300

120

10%

100

250

5%

Capex YoY

80

200

0%

60

-5%

150

40

-10%

100

20

50 Global Economic Policy Uncertainty Index

-15%

0

-20 CEO Economic Outlook

-20%

0

2002

2004

2006

2008

2010

2012

2014

2016

2018

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Source: Baker, Bloom & Davis, Business Roundtable, Bureau of Economic Analysis, and FactSet. Capex growth is U.S. real nonresidential gross private domestic investment. The Global Economic Policy Uncertainty index is a GDP-weighted average of national economic policy uncertainty indices for 20 countries, which is derived from own-country newspaper articles that discuss economic policy uncertainty in that month. The Business Roundtable CEO Economic Outlook Index is based on a quarterly survey of member CEOs’ plans for hiring and capital spending, and their expectations for sales, over the next six months. Taking these factors together, the survey signals the direction of the U.S. economy.

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