CFO survey of top US companies: recession will occur in the first half of 2023, the Dow will fall below 30,000 points!

Many economic forecasters and Wall Streeters have made their views on inflation and Fed policy clear: The U.S. economy and markets will get worse before they get better. This sentiment is shared by CFOs at many top companies, according to the latest findings from the CNBC CFO Council.

More than 40% of CFOs cite inflation as the number one external risk to their business, with nearly a quarter (23%) citing Fed policy as the biggest risk factor and another 14% The Russian-Ukrainian conflict is the biggest business risk.

CFOs don’t all think the Fed is ultimately out of control of inflation. Just over half (54%) said they have confidence in the Fed, but that’s still not enough to change their view of the current state of the economy and where policy decisions are headed: a recession.

A majority (77%) of CFOs surveyed said a recession will occur in the first half of 2023. No CFO is predicting a recession before the second half of next year, and no CFO thinks the economy will avoid it.

The yield on the 10-year Treasury note, which has doubled this year to about 3%, is expected to hit 4% by the end of 2022, 41% of CFOs said. The same percentage of CFOs expect the 10-year yield to be no higher than 3.49% by the end of the year. But there are also concerns that rates will rise at a faster pace, with some on the committee expecting the 10-year rate to rise above 4% by the end of the year.

Growth prospects for the U.S. economy and the global economy are bleak. The Atlanta Federal Reserve’s GDPNow tracker predicts the U.S. economy will experience negative growth for the second straight quarter, matching the classic definition of a recession. The World Bank has just cut its forecasts for global growth and warned that a period of stagflation like the 1970s could be on the horizon, with President David Malpass saying “for many countries In other words, a recession will be inevitable.” The Organization for Economic Cooperation and Development (OECD) also lowered its forecast for global economic growth this year.

As inflation rises and interest rates rise, the survey shows, the economic outlook is influencing CFOs’ views on the next phase of the stock market’s move: the stock market will be lower. A majority (77%) of CFOs expect the Dow Jones Industrial Average to fall below 30,000 before making a new high, implying a decline of more than 18% from its current level. More than half (55%) of CFOs said: The energy industry will be the fastest growing sector of all economic sectors over the next six months.

But a key point made by CFOs is that many companies are making plans to look beyond short-term headwinds. In the survey results, there was a tug of war between the deteriorating outlook and many businesses showing no signs of cutting spending or hiring. While there has been news in the tech industry of saving money, slowing or freezing new hires, and even canceling existing job offers, companies on the CFO Council have not acted.

CFOs (36%) who say they will spend more in the coming year are twice as likely to spend less (18%), while nearly half (46%) say they will maintain at least current levels of spending. In addition, companies are still hiring, with more than half (54%) saying that headcount will increase over the next 12 months. Only 18% expected layoffs.


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