President-elect Donald Trump’s recent election victory has generated a surge of confidence among global CEOs and investors about the global economy’s future. A comprehensive survey conducted by Teneo, a leading global CEO advisory firm, reveals that 77% of global CEOs and 86% of institutional investors anticipate improvements in the global economy during the first half of 2025. This marks a significant shift in sentiment compared to the pre-election period.

Survey Overview

Teneo’s survey included insights from over 300 global public company CEOs and 380 institutional investors, collectively representing approximately $10 trillion in company and portfolio value. The results of the survey demonstrate a notable increase in optimism following the election results. In 2024, only 45% of global CEOs were optimistic about economic improvements, highlighting a significant 32-point increase in confidence for 2025.

The survey indicates that this wave of optimism stems from expectations of pro-business policies, deregulation, and tax reforms promised by the incoming Trump administration. The findings reveal that business leaders and investors see a brighter outlook, which they attribute to the so-called “Trump Effect.”

Key Findings from the Survey

Resurgence in Mergers and Acquisitions (M&A):
Over 80% of CEOs and investors predict a substantial increase in M&A activity in 2025. The expectation of reduced regulatory hurdles and a more business-friendly environment is driving this anticipated resurgence. Companies are poised to take advantage of greater access to capital and a favorable policy climate under the Trump administration.

Most Attractive Investment Destination:
The United States emerged as the top choice for global CEOs as the most attractive investment destination. The combination of anticipated tax reforms, deregulation, and economic stability positions the U.S. as a leader in global investment.

Accelerated Business Expansion Plans:
Half of the surveyed CEOs reported plans to increase investments and hiring as a direct result of the 2024 election outcome. More than 64% of CEOs also believe that Trump’s anticipated changes to tariffs and regulatory rollbacks will positively impact their businesses, further fueling expansion plans.

Boost in Economic Sentiment:
The survey showed a clear connection between political outcomes and economic sentiment, with 76% of CEOs and 83% of investors believing that the 2024 global election results will lead to greater worldwide economic stability and growth.

Market Reactions

The financial markets have reflected this newfound optimism, with indices like the S&P 500 showing substantial gains in the post-election period. The S&P 500 has risen by 27% this year, indicating heightened confidence in corporate profitability and overall economic growth. While the markets have embraced the promise of reduced taxes and deregulation, some analysts remain cautious about potential economic challenges. Critics argue that the administration’s trade policies, including tariffs, could disrupt global supply chains and lead to inflationary pressures.

Additionally, the anticipated economic expansion has increased activity in industries ranging from technology to energy. Many companies are preparing to capitalize on the upcoming policy shifts. The real estate and infrastructure sectors, in particular, are poised for growth as the administration is expected to prioritize large-scale infrastructure projects.

Mergers and Acquisitions Surge

The revival of M&A activity is one of the most prominent outcomes of this renewed optimism. Dealmakers predict global M&A volumes could surpass $4 trillion in 2025. This would mark a return to pre-pandemic transaction levels, driven by accessible capital and favorable economic policies.

Corporate leaders cite the reduced corporate tax rates and streamlined regulatory frameworks as significant drivers of the uptick in M&A activity. However, challenges such as navigating geopolitical uncertainties and potential changes to international trade policies remain areas of concern.

The Global Perspective

The optimism surrounding the “Trump Effect” is not confined to the United States. Business leaders in regions like Europe and Asia have expressed mixed reactions, ranging from cautious optimism to outright enthusiasm. European businesses are preparing for potential trade disruptions while also seeking opportunities to strengthen their ties with U.S. markets. In contrast, Asian economies like Japan and South Korea are optimistic about stronger bilateral trade agreements under the new administration.

In Europe, central banks are closely monitoring the economic landscape. The European Central Bank (ECB) recently adjusted its interest rates in response to economic uncertainties, citing the potential impact of U.S. trade policies. European businesses are positioning themselves to navigate potential tariff changes and seize new market opportunities.

In Australia, corporate leaders are watching closely as the new administration’s policies unfold. While many anticipate benefits from a pro-business environment, others remain cautious about inflationary pressures and the potential for heightened trade tensions with China.

The Consumer Confidence Surge

Beyond corporate boardrooms, consumer confidence has also seen a significant boost. Historically, consumer sentiment has been a key indicator of economic performance. The election results appear to have alleviated some of the public’s concerns about economic stability. Analysts point out that the surge in consumer confidence could lead to increased spending, further stimulating economic growth in the short term.

However, some economists warn that relying too heavily on political outcomes as a driver of consumer sentiment may create volatility. The disconnect between economic fundamentals and public perception could lead to unforeseen market corrections.

Challenges Ahead

While the optimism is palpable, the road ahead is not without challenges. The Trump administration’s proposed trade policies, including the possibility of higher tariffs on imported goods, have raised concerns about potential trade wars. Geopolitical tensions, particularly with China and the European Union, could pose risks to the global economy.

Inflation is another potential challenge, as pro-growth policies could increase demand and strain supply chains. The Federal Reserve and other central banks will need to balance economic growth with measures to control inflation.

Additionally, critics of the administration caution that while tax cuts and deregulation may boost short-term growth, they could contribute to rising fiscal deficits. The long-term implications of these policies remain uncertain, making it crucial for policymakers to maintain a balanced approach.

Conclusion

The “Trump Effect” has undeniably reshaped global economic sentiment, instilling a renewed sense of optimism among CEOs and investors alike. The anticipated pro-business policies of the incoming administration are expected to drive investment, hiring, and corporate expansion in the months ahead.

While challenges such as trade tensions and inflationary pressures persist, the overall outlook for 2025 remains positive. Businesses and policymakers alike will need to navigate this evolving landscape carefully, capitalizing on opportunities while mitigating risks.

As the global economy prepares for a new chapter under President-elect Trump, the world watches closely to see how these changes unfold and what they mean for the future of global commerce.

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Photo source: Google

By: Montel Kamau

Serrari Financial Analyst

19^th December, 2024