Political Uncertainty Is Bad News For Business Investment

Every time the rhetoric heats up in Washington, corporate decision makers stress out.

According to Fidelity’s latest business cycle update, when there’s a lot of political uncertainty, corporations just don’t want to shell out the big bucks for stuff that might help them grow, especially stuff like new plants, property and other big ticket items.

“The significant economic and policy uncertainty coming from the fiscal cliff debate are weighing heavily on the corporate sector. Weak business investment created a drag on GDP growth during the third quarter, and survey data indicate that more companies are paring back capital expenditure plans over the next six months. Third-quarter earnings and revenue growth finished largely flat compared with the prior year, evidence of the slowdown in productivity and the difficulty in expanding profit margins beyond near-record levels.”

With the debt ceiling and the sequestration debates still on the table, traders and economists should continue to be mindful of the economic impact of all this uncertainty.

Here’s a long-term look via Fidelity:

uncertainty capex

Photo: Fidelity Investments

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