Confidence in the U.S. economy continues to ride high, although concerns loom around trade tension and the business cycle, according to a new survey of middle market dealmakers by Antares Capital.

Thirty-seven percent of survey respondents said they are more or much more confident in the outlook for the US economy than they were at the beginning of 2018. More specifically, private equity sponsors and middle market borrowers are upbeat with 50 percent saying they are more confident than they were in January, while lenders are the most pessimistic group surveyed, with 46 percent saying they have grown less confident in the future of the US economy.

“This sentiment is more cautious than what we heard at the beginning of the year when more than 87 percent of market observers told us they were optimistic about the prospects for the U.S. economy,” said John Martin, managing partner and co-CEO of Antares. “Confidence certainly remains high, but this dip in optimism could be an indication that conviction may be becoming increasingly fragile.”

While upbeat about the U.S. economy and merger and acquisition activity – 12 percent foresee strong M&A growth (10+ percent) in 2018, 55 percent expect modest growth (3-9 percent) – survey respondents are apprehensive about the impact of trade tension and the prospects of a recession. A majority (69 percent) are either very or somewhat concerned that rising trade tariffs or a potential trade war could impact portfolios. Sixty-five percent believe a recession is somewhat or very likely in the next 18 months.

As for Environmental, Social and Governance (ESG) issues, cybersecurity stood out as the top issue for forty percent of respondents. Other top concerns included access to skilled labor, board and workplace diversity, and reputation management.

The Antares Middle Market Dealmakers survey was conducted May 2nd and 3rd at the ACG InterGrowth conference in San Diego. The 100 respondents represent a variety of investment professionals, limited partners, advisors, senior lenders, junior lenders, intermediaries and private equity firms. Further insight on the health and outlook of the middle market can be found in the 2nd annual Antares Compass report, a survey of middle market private equity borrowers, sponsors and loan investors.