For the first time since the pandemic, a majority of Fidelity analysts believe corporate cost inflation will decline over the next year. Analysts expect improvement in most sectors during the next 12 months.
As it does every year, Fidelity International takes the temperature of its analysts around the world to gauge their knowledge of the companies and sectors they cover. Fidelity analysts hold more than 20,000 meetings with companies annually. In other words, every business day, one of your analysts speaks with company management every 10 minutes. From those conversations they discovered two main trends: that Companies are setting their sights on expansion and Japan is emerging as an economic beacon for the world in 2024.
Another striking change. For the first time since the pandemic, a majority of Fidelity analysts believe business cost inflation will decline over the next year. “According to our analysts in North America, no one talks about inflation anymore. Salaries have been the latest complication, but they seem to be returning to normal quickly as well,” said Geeta Pal, global head of fixed income analysis at Fidelity International.
Forecast by sector: Crude oil and gas, negative point
With regard to the economic trend, In most sectors, analysts covering these sectors expect them to show improvement this year. In this sense, the percentage of those who confirm that their sector is expanding rises from 52% currently to 61% who expect this to be the case within 12 months.
However, there are a few sectors where responses indicate that conditions may worsen as the year progresses. Analysts who cover oil and gas companies in North America say falling commodity prices are putting a strain on the energy sector.. The financial sector will also see the other side of lower interest rates.
2024: The Year of Japan
As mentioned, Fidelity analysts' expectations are just that Japan will become the economic beacon of the world in 2024. Expectations growth of income and benefits In 2024, Japan will be higher than in any other region. Analysts covering Japan are also the most optimistic about an expansion Footnotes Of the benefits. Thus, Japan is ahead when it comes to expectations regarding business investment, return on capital, the ability to pass costs on to consumers, and whether or not its companies will be in an expansion phase during the next cycle of the year on these dates. For this 88% of Fidelity analysts in Japan expect their sectors to expand within 12 months.
There is a simple explanation for much of this optimism. The Japanese economy has finally put more than two decades of stagnation and stagnation behind it, and there are encouraging signs pointing to widespread price increases. Although inflation has been a major headache for much of the world in recent years, it has now become a welcome problem in Japan.“Pal explains.
Gray swans?
What could stop this positive scenario? A large number of elections are scheduled to be held this year in 2024 and the largest number of people in history will have to go to the polls, increasing the risk of disruption. However, one of the most surprising findings of the survey is this A majority of analysts (65%) indicate that the companies they cover do not mention the election at all.
Those who do are divided when it comes to talking about the risks associated with the election. It pretty much comes down to it Specific scenarios in specific sectors. Only 28% of all Fidelity analysts say the current geopolitical context is restricting investment plansThis is the lowest percentage of analysts saying this since we started asking this question in 2017.
“The end of the era of zero interest rates was always going to cause tensions. We are already in a period where companies are tightening their belts, demand is under further pressure and pricing power is declining, but This year's survey provides clear signs that, regardless of how the slowdown plays out, for most companies, the system will restart and the next phase will lift them up.Instead of burdening them,” Pal predicts.
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