The articles provide valuable insights into the current upturn in investment. Key factors driving corporations to increase spending include booming stock markets, synchronized global growth, and enthusiasm for technology. However, some CEOs urge caution amidst the exuberance, warning of past investment missteps during such euphoric times. Careful consideration must be given to what, where and when to invest. Investment is pivoting towards intangibles like software and AI, while emerging markets beckon. With investment at healthy levels compared to history, a surge of 10% in 2018 nominally appears likely. If global expansion continues, the upturn in investment still has room to run despite pockets of uncertainty.
Excitement over growth and profits is spurring investment interest
The articles describe an ebullient environment, with stock markets reaching new highs and synchronized global economic growth powering demand. Corporate profits have soared 23% above prior peaks. Sales teams worldwide are reporting record orders. With such a favorable backdrop and expectations for tax reform, many politicians, economists and investors are cheering businesses to spend. However, some CEOs urge restraint, having lived through past episodes when exuberance led to misguided investments.
Investment patterns and preferences are evolving
While total investment as a percentage of GDP is around historical averages, the articles note shifts in who and what is being funded. Tech firms now account for almost a quarter of investment, taking share from energy and industrial corporations. Intangible spending on areas like software and AI is claiming a greater portion of budgets. Geographically, emerging markets and China are attracting more interest given their growth potential.
Capacity and animal spirits point to further increases
After years of caution, animal spirits may be stirrings with profits high and capacity utilization elevated. Analysts also note that shares of companies investing heavily are no longer lagging, reducing the focus on buybacks. With economic expansions rarely lasting over 10 years and firms still cautious after the Great Recession, there may be room for business investment to rise further.
Selectivity and technology change warrant a measure approach
However, business leaders preach selectivity and priority-setting given limited resources. With technology transforming industries, companies also risk allocating capital to projects and facilities that rapidly become obsolete. Investment budgets may swell in 2018, but restraint and rigorous asset allocation processes will distinguish leading firms.
Amidst the fanfare over synchronized global expansion, corporate investment does look poised to accelerate as firms unleash years of pent-up capital spending. However, discretion over what, where and when to deploy funds will determine winners. Although economic uncertainty lurks, the upturn in investment still retains momentum.