CEOs worry political unrest could hamper business

2 mins read

The recent survey of CEOs by KPMG highlights the growing concern among business leaders about geopolitics and political uncertainty as significant risks to corporate growth over the next three years. This shift in executives’ assessment of political risk is notable, as these concerns didn’t even make the top five in 2022. The political standoff in the U.S. government, including the threat of a shutdown and the vote to remove Speaker Kevin McCarthy, has heightened worries about potential negative impacts on the country’s budget, credit ratings, and financial markets.

In addition to political concerns, CEOs are also wary of rising interest rates and restrictive monetary policy. The Federal Reserve has been raising interest rates to combat inflation, and 77% of CEOs believe this could contribute to the risk of a global recession. Fed officials have indicated that interest rates may remain higher for an extended period as they address inflationary pressures.

Investors are also feeling the impact of political uncertainty, with over half (52%) expressing concerns about politics and the 2024 presidential election affecting their portfolio’s performance in the next 12 months. Inflation worries were even more prominent among investors, with 59% expressing concerns about its impact on their investments. It’s worth noting that historical data suggests that in most presidential election years, the S&P 500 has delivered positive returns, with variations based on the political party in office.

Despite these concerns, CEOs appear to be slightly more optimistic about the global economy’s outlook in the next three years compared to previous surveys. In September, 73% of CEOs expressed confidence in global economic growth prospects, compared to 71% in August 2022 and only 60% in August 2021. This optimism may reflect expectations of economic recovery and stability despite the current political and economic challenges.

The survey indicates that political instability and economic factors are top of mind for business leaders and investors, and their assessments of these risks are evolving in response to changing circumstances.