Law Firm Leaders Express Growing Anxiety Over Global Economic Outlook
While Big Law leaders view the 2019 economy with trepidation, many are confident in their own law firms' prospects.
January 10, 2019 at 01:55 PM
3 minute read
Wall Street analysts. The World Bank. And now law firm leaders.
Everybody, it seems, is lowering their expectations for the 2019 economy.
Big Law managing partners Thursday joined a chorus of financial prognosticators who have expressed growing anxiety over this year's economic outlook. A semiannual Citi Private Bank Law Firm Group measurement of law firm leaders' outlook for the global economy saw its largest decline in at least two years, falling by 15 points to 92, below a neutral score of 100.
On a positive note, Big Law leaders' pessimism regarding the broader economic outlook has not completely carried over to their belief in their own firms' futures. Law firm leaders surveyed by Citi expressed growing optimism regarding demand, realization rates and revenue. They expect large increases in partner and associate head count.
Firms do have wind in their sails. The legal market last year experienced one of the strongest years since the financial crisis, according to a number of reports.
Nearly 75 percent of leaders expect positive demand growth in the first half of 2019, while only 7 percent of leaders expect demand to decline. About 50 percent of leaders expect revenue growth between 2 and 5 percent, while only 7 percent expect revenue declines.
Net income was the lone law firm financial metric that leaders as a group became less optimistic about compared with the previous survey in the second half of 2018. Even so, only 8 percent of leaders expect net income to decline. Nearly 20 percent of respondents expected growth of more than 5 percent.
The apparent dissonance between leaders' economic pessimism and optimism for their own firms has been evident in the Citi survey in other economic cycles, too. For instance, the highest level of confidence leaders expressed in the global economy over the past two years happened in the first half of 2018. That was the same month they expressed their lowest level of confidence in their own firms' revenue in the past two years.
Law firm leaders are not alone in viewing the world economy with trepidation.
This week, the World Bank lowered its projections for global GDP growth in its semiannual outlook for the world economy, which it titled “Darkening Skies.” The report said global GDP would grow 2.9 percent, down from 3 percent growth in 2018.
“Growth has weakened, trade tensions remain high, several developing economies have experienced financial stress, and risks to the outlook have increased,” the World Bank's report said.
Meanwhile, at least five large investments bank have lowered their projections for the stock market, CNBC reported this week. Barclays lowered its year-end 2019 projection for the S&P 500 to 2,750, down from 3,000.
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