Investor enthusiasm in the U.S. short-term wanes due to tariff concerns
In a recent survey conducted by KPMG, it has been revealed that tariffs in the United States are having a significant impact on the long-term investment strategies of institutional investors. The research, based on surveys of over 300 institutional investors in the U.S., including private equity, asset management, and venture capital professionals, was conducted in January and February, and again in April.
Key findings from the survey indicate a shift in investor optimism over the past few months. While near-term optimism about economic growth over the next 18 months has decreased from 96% in early 2023 to 84% by April, long-term optimism has remained relatively steady, with confidence increasing from 84% to 92% over the same period.
The near-term decline in optimism can be largely attributed to tariff-related uncertainties, which have spurred caution in investment decisions. As a result, there has been a growing focus on domestic companies and industries perceived as less vulnerable to tariffs. This strategic pivot aligns with the broader policy goal of repatriating manufacturing back to the U.S., which many institutional investors appear ready to support.
Despite short-term concerns, investors remain optimistic about economic growth beyond 18 months, viewing tariffs as a temporary hurdle rather than a permanent deterrent. This optimism is particularly high among venture capital respondents, with 95% stating they're optimistic for economic growth beyond 18 months, the highest level among all the respondents.
The imposition of tariffs is also leading to a recalibration of risk appetite among institutional investors. They are becoming more cautious and selective, particularly in industries heavily exposed to tariff volatility. This recalibration involves prioritizing investments that can better withstand regulatory and trade uncertainties.
Tariffs are also challenging institutional investors to rethink their investment strategies and risk appetite, according to Tarek Ebeid, a private leader and partner in charge of KPMG US' Northern California audit practice. He stated that tariffs are prompting institutional investors to reassess their investment focus and risk appetite.
In conclusion, while tariffs have introduced near-term challenges and some dampening of investor confidence, they also serve as a catalyst for institutional investors to strategically shift toward domestic investments and industries with resilient supply chains. This shift maintains a positive outlook over the longer term.
- In spite of short-term concerns related to tariffs, there is a growing focus on financially backing domestic companies that are perceived as less vulnerable to the effects of tariffs.
- Despite the imposition of tariffs, investors, particularly venture capitalists, are optimistic about economic growth beyond the 18-month timeframe, viewing tariffs as a temporary hurdle.
- Institutional investors are becoming more cautious and selective in their investments due to tariff volatility, prioritizing those that can better withstand regulatory and trade uncertainties.
- The permanent deterrent nature of tariffs is being questioned by investors, with many viewing them as a temporary obstacle rather than an insurmountable challenge.
- Tariffs are prompting institutional investors to reassess their investment focus and risk appetite, leading to a recalibration of strategies to better accommodate market volatilities.
