Macroeconomic outlook: US

This article was produced by ELITE Connect and originally published on the ELITE Connect platform

Following on from our recent look at macroeconomic issues in Europe, we examine the current prominent topics in the US, and consider how companies and IROs can address issues effectively with their shareholders and potential investors.

Despite the recent turbulent political environment, the economic outlook in the US is looking relatively buoyant, with the election of Donald Trump not having the significant effect that many forecast or speculated about. 

Jonathan Golub, chief equity strategist at RBC Capital Markets, comments that Trump’s appointment has been a mixed bag for affected companies. ‘While it feels as if Trump is of great importance to markets, the data challenges this,’ he explains. ‘In the first two to three weeks after the election, the companies that would benefit from Trump policies the most (such as those with high tax rates) led the market. Since December, however, these same stocks have been underperforming as the market has focused on the economy and on the challenges of implementing such initiatives.’

So what are the macro issues driving investor sentiment today? Golub points to a pick-up in economic activity and inflation expectations over the past 12 months, most evident in global purchasing manager’s indexes. ‘The key issue now is an improving global economy and the renormalization of ultra-low inflation and interest rates,’ he says. ’That said, what people are talking about most is the policy environment and how this will play into future growth expectations.’  

From an IR perspective, Andrew Kramer, vice president of investor relations at NetScout, observes that in addition to being concerned with the macroeconomy, investors are keen to drill down into the impact of other policies. 

‘As a US-listed public company, we haven’t necessarily seen any significant change in recent months concerning investor interest on the macroeconomic landscape’s potential impact on our business,’ he states. ‘Rather, investors have been increasingly eager to understand the ramifications associated with the new presidential administration in areas such as increased defense spending and tax reform.’

Reinforcing the need for effective communication with investors, Kramer advises that IROs ensure they are able to advise on a wide range of macroeconomic issues, and be proactive in communicating the potential impact these may have on company performance. 

‘It’s critical that IROs help investors understand the direct and indirect impact of macroeconomic issues, particularly as they relate to the behavior of customers, partners and other key constituencies in a company’s marketplace,’ he says. ‘Further, it may be important to remind investors about exposure to certain geographic regions and how currency swings can directly affect top-line and bottom-line performance, particularly if the company has factored such issues into its outlook.’