January 23, 2017

As the world prepares for a new president in the US, the launch of the ‘Brexit’ process in the UK and a string of elections in Europe in the year ahead, you don’t need to be an oracle to predict that 2017 is going to be a year of considerable uncertainty and change for investors.

However, research from Fidelity International, providing insight into the expectations of company management teams across the globe, suggests that concerns over political risk are not enough to disrupt the upbeat cyclical forces that are evident across all sectors and regions.

With the US election fresh in their minds, 72% of Fidelity’s analysts who focus on the US said their companies think the impact of Donald Trump’s win over the next two years will be positive, citing corporate tax reform, income tax cuts, infrastructure spending, Trump’s pro-fossil fuel stance, deregulation, steeper yield curves and the ‘clean sweep’ in Congress.

Among Fidelity International’s analysts covering Europe, the number who believe Trump’s presidency will be positive for their companies over this period (39%) outnumber those who regard it as negative (12%). The majority of analysts covering Asia (67%) say their companies do not expect any impact at all. It is only in emerging Europe, the Middle East, Africa and Latin America (EMEA/Latin America) where the impact is widely seen as moderately negative (64%).

These were the results from Fidelity International’s annual Analyst Survey*, encompassing the views of 146 equity and fixed income analysts resulting from c. 17,000 1:1 meetings held with corporate decision makers.


Of all the political risks outside of the US, Brexit is arguably the most tangible one, even if exit procedures have yet to be triggered.

As a result, the majority of European analysts (59%) and more than a third of Japanese analysts (40%) say Brexit will have a moderately negative impact on their companies, affecting industrial and energy companies, discretionary consumer goods producers, financials, and IT firms in particular.

Although official investment statistics do not yet show an impact, half of all European analysts (49%), and one in four Asian analysts (25%) warn that their companies are now less willing to invest in the UK over the next two years. They note the dampening effect of uncertainty in general, the lack of clarity about future UK/EU relations and other trade ties, the risks to London’s financial sector and property market, and the possibility of a loss of talent.

European elections

Vulnerability to political upheaval elsewhere in Europe is generally deemed as manageable. Outside of Europe, more than three quarters (80%) think European political uncertainty or instability will have a low impact on corporate profits, or often none at all. Even among European analysts, over a third (37%) think corporate profits would be unaffected or only slightly affected and half think their companies are merely moderately vulnerable, leaving only one in eight (14%) who see significant risks.

Japanese companies seem marginally more vulnerable than others outside Europe with 34% of analysts noting moderate to high vulnerability compared to 18% for the other non-European regions combined, while the sectors to watch are industrials, materials, financials, and IT.

Michael Sayers, Director of Research at Fidelity International, comments: “Our survey shows why it’s so important not to get carried away by sentiment with our analysts’ finding that Trump’s presidency and the new mix of policies is actually boosting corporate sentiment.

“The survey did uncover concern about growing protectionist policies across the globe, including in the US. US analysts warn of the risks to component imports and international supply chains from tariffs, reduced tax deductibility, new rules on imports and disincentives to outsource to India or elsewhere.

“However, encouragingly, none of these political risks are seen as strong enough to offset upbeat cyclical forces that are evident in all regions and sectors. As a result, our analysts think core corporate indicators are improving in all sectors and all regions, and are more positive about the outlook for their companies.”