Global corporate sentiment has fallen to levels not seen since 2016 as companies fight weaker consumption and rising costs, according to an analyst survey by Fidelity International.
The annual macro-economic survey of Fidelity’s own global analyst team aggregates the results of some 16,000 individual company meetings.
This year, the survey found, corporate sentiment has suffered its sharpest drop since the survey’s inception in 2011, falling from 1.6 in 2018 to 0.6. Nevertheless, recession is not imminent.
Sentiment about China in now negative, while concerns about the US administration’s economic approach are mounting. Healthcare was the only sector to sustain optimism.
Nevertheless, the report’s authors added that this year’s findings “should be taken in the context of a buoyant 2018 survey and despite the notable dampening of confidence, Fidelity analysts remain cautiously optimistic for the year ahead.”
Fidelity’s Sentiment Indicator is based on five main areas: management confidence, capital expenditure, dividend policy, returns on capital and balance sheets.
A third of analysts globally reported their sectors were in a slowdown or recession versus 13% last year.
Only a fifth of analysts reported an expansion of activity, against 35% in 2018.
The survey also found that analysts are now split 51% to 49% about whether we are at the end of the business cycle, compared with 68% for “no” last year.
Michael Sayers, Fidelity’s director of research for equities, said: “An exuberant start to 2018 has given way to a cautious 2019.
“This year’s pessimism has two core drivers, a weaker consumer and increasing costs of doing business; both of which threaten to squeeze profit margins in 2019.
“While we do not see a full-blown recession in the next six to 12 months, it is clear we have taken another step towards the end of the cycle that started a decade ago and as a result, corporates’ approach to risk management is more important than ever.”
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