McKinsey’s September 2018 Global Survey of more than 1,100 executives from various regions and industries around the globe found that the United States offers the best environment for business growth.
Respondents to the survey expressed declining optimism on the global economy, especially in emerging markets. The United States, however, has gained more attention in recent months as a destination for new business opportunities.
Private-sector executives were asked which countries would provide their businesses with the biggest opportunities for growth in the next year.
“Six months ago, respondents tended to cite their own countries or those in nearby markets,” the report stated. “But the latest results suggest that the best opportunities seem to be shifting away from local emerging economies (China and Brazil, for example) and toward developed economies, such as the United States.”
Respondents in China, Japan, and India now identify the United States—rather than their own countries—as the most attractive market for their businesses.
In their assessment of the world economy, 38 percent of executives say conditions have worsened in the past six months, up from 26 percent in June’s survey. And it’s the first time since late 2016 that a larger share of respondents believes global economic conditions have deteriorated than have improved.
The survey also found that the respondents have increasingly cautious views on international trade.
“This result may not be surprising, as trade issues still prevail as the perceived top threats to economic growth,” said the report.
Overall, respondents in emerging markets are notably more pessimistic than their peers in developed economies.
In the past six months, emerging-market executives have become more negative about the broader economy and believe their workforce will shrink in the months ahead. One-quarter of them also expect company profits to decline in the next six months, more than double the share that said so six months ago.
The downbeat view on emerging markets is also reflected in fund flows globally.
According to the latest capital-flows report published by Institute of International Finance (IIF), investors have been pulling their money out of emerging markets since the beginning of this year.
“Fund investors, which are typically located in mature markets, sharply reduced their exposure to emerging markets while increasing exposure to the United States,” Emre Tiftik, deputy director at the IIF, said in an email.
This trend is likely to continue as investors have become warier of emerging markets as a whole.
U.S. tax reform, which was signed into law by President Donald Trump in December, has changed the dynamics in the global foreign direct-investment landscape as well. The tax cuts could lead to the repatriation of almost $2 trillion of overseas funds, according to the United Nations Conference on Trade and Development.
In addition to the tax cuts, foreign investors also enjoy numerous business-friendly policies Trump has pushed through since he took office in January 2017, including deregulation.
“The entrepreneurial spirit is unique here, and deregulation means the country offers something very unusual,” Barbara Humpton, head of Siemens in the United States, told the German daily Handelsblatt in June.
On Oct. 3, the Dow Jones Industrial Average hit a new record for the 15th time this year. Amid rising uncertainty related to trade wars and the slowing global economy, the U.S. stock market has been buoyed by strong economic growth and corporate earnings data throughout the year.
McKinsey’s survey was conducted online between Sept. 3 and Sept. 7 and gathered responses from 1,158 participants, representing the full range of regions, industries, company sizes, functional specialties, and tenures. The data were weighted by the contribution of each respondent’s country to global GDP.