A trader works on the floor of the New York Stock Exchange.
lucas jackson | Reuters
Each time the stock market has rebounded from a low in 2022, it has come back down. Investors’ high hopes that the worst is yet have turned into false leaders amid the highest interest rates in 15 years. The current fall in stocks at the end of the year is just the latest example, and the sell-off is not over yet.
The last damage of Dow Jones Industrial Average will get worse before it gets better, and even if the Fed’s battle with inflation leads to success, it will come at the cost of a hard landing for the economy next year, according to a new survey of investors. CFOs conducted by CNBC.
The results of the latest quarterly CFO survey are not surprising. Throughout 2022, conversations with individual members of the CFO Council most often tended to suggest that the economy was headed for a hard landing. At the recent annual summit in Washington, DC on November 2. On the 30th, a poll in the room showed that the majority of CFOs remained of this opinion.
the CNBC CFO Council The Q4 2022 survey is a sample of the current outlook from top financial executives. It was conducted among 23 CFOs of large organizations between November 1st. 30 and Dec. 20.
Here are some details.
The recession is coming
It has been noticed that no recession has been predicted more than one that has still not hit the economy. Include CFOs in this tipster camp. More than 80% of respondents to the fourth quarter survey expect a recession in 2023. This percentage has increased quarter over quarter as more CFOs push back on earlier forecasts that economic respondents had already entered a recession. CFOs are split on timing, with equal percentages (43%) saying the recession will hit in the first or second half of the year.
Whenever a recession hits, the timing is less important than the survey which found that less than 10% of CFOs think a soft landing – the idea that the Federal Reserve can cool economic conditions, bring down inflation and raising unemployment without sinking the economy – is possible.
No more selling from Dow
CFOs’ views on the recession spell more pain for a stock market that ends the year with another volatile drop in value. More than half of CFOs (56%) surveyed expect the Dow Jones Industrial Average to fall back below 30,000 before it hits 40,000 for the first time, and that’s nearly triple the number of CFOs (21%) who believe the worst is in the market or chose not to call stocks in the survey.
But the outlook is not all bleak. In a few key areas for the economy and the markets, CFOs believe the worst is here. For example, with inflation.
Inflation peaked
While it remains the top external risk factor cited by CFOs — and cited by more CFOs in the fourth quarter — nearly two-thirds of respondents now say inflation has peaked. And chief financial officers believe that despite the cost to the economy and the stock market, the Fed is doing a better job. More than half of CFOs now rate the Fed’s handling of inflation as “good” or “excellent,” a major improvement. Chief financial officers who described the Fed’s efforts to control inflation as lackluster have fallen from about a quarter of respondents in the third quarter to less than 10% who hold that view now.
Political risks will not weaken the market
One reason inflation was cited by more CFOs as the top external risk factor facing their companies: Another risk was down 10% quarter-over-quarter , the risk of over-regulation. The midterm elections and the divided government could be responsible for this decrease in fear.
On other key political risks on the horizon in 2023, CFOs believe the headlines will be worse than reality. A large majority of CFOs (over 80%) say a government shutdown is unlikely in 2023, and they also think it’s unlikely – more than half say it’s “very unlikely” – that Congress fails to raise the debt ceiling, a point of view held by more than 90% of respondents. This mirrors the view offered by Kevin Brady, the top Republican outgoing on the House Ways and Means Committee, who told CFOs at the recent CNBC CFO Council Annual Summit in Washington, DC, that it was an “economic scare campaign”.
“At the end of the day, our debt will be paid on time. … I’m not anticipating 2011 or even 2018,” Brady said.
Businesses will continue to spend and hire
While the economic situation and the stock market have weakened this year, one set of findings that have been consistent in the CFO survey is the relative stability of spending and investment plans. This remains the case in Q4.
Less than a quarter of CFOs expect their company’s spending and headcount to be reduced in 2023. That’s not to say companies aren’t being more cautious. An equal percentage (around 40%) of CFOs say their spending and headcount will stay the same next year as those expecting it to increase.
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