US Election Risk Threatens Corporate Investment Plans, Survey Reveals

By Howard Schneider

WASHINGTON (Reuters) – Almost one-third of financial officers at companies indicate that uncertainties surrounding the U.S. presidential election set for November 5 have prompted them to delay or reduce their investment plans, potentially hindering economic growth in the near term.

A survey conducted by the Atlanta and Richmond Federal Reserve Banks in conjunction with Duke University’s Fuqua School of Business revealed that 21% of 479 responding chief financial officers reported postponing investments due to uncertainty regarding the upcoming U.S. Presidential and Congressional elections. Additionally, over 15% indicated they had scaled back their investment strategies.

Participants were permitted to select multiple responses, leading to some overlap in the categories; however, a total of 30% acknowledged that election-related uncertainty impacted their investment plans in some manner. Conversely, more than 64% reported no effect.

Atlanta Fed economist Meyer and survey director Daniel Weitz noted that firms most impacted by election uncertainty displayed less optimism regarding future prospects and were less inclined to invest in expanding capacity or upgrading existing assets. These businesses tended to prioritize cost-reduction investments in equipment and real estate.

Furthermore, these companies anticipate that they will not recover from the slower growth experienced in this year by 2025, according to Meyer and Weitz.

The quarterly survey showed a general sense of optimism among CFOs, with 69% expressing confidence in their own companies and 60% feeling positive about the overall U.S. economy. Responses to these inquiries were consistent with those from the second quarter.

However, the findings suggested that a substantial number of firms are holding back investments because of the contentious political climate and the stark contrast between Democratic candidate Vice President Kamala Harris and Republican challenger former President Donald Trump.

While the survey did not delve into partisan opinions regarding which candidate might be better for the economy, a significant number of CFOs ranked various policy topics as concerns in light of the November election. Approximately 60% identified regulatory policy as their primary worry, followed closely by monetary policy at around 59% and corporate tax policy at 54%.

For over a year, monetary policy has been the leading concern for CFOs, a period marked by the Federal Reserve’s commitment to maintaining high interest rates to combat inflation. The central bank began lowering rates recently.

Inflation has slipped down the list of concerns for CFOs, with only 8% citing it as their top issue.