THE BOTTOM LINE

The recession will hit in the first half of 2023 and the Dow is headed lower: CNBC CFO survey

PUBLISHED THU, JUN 9 20228:23 AM EDTUPDATED 7 MIN AGO

Eric Rosenbaum
@ERPROSE

KEY POINTS

• Amid high inflation that has become the No. 1 business risk, not a single chief financial officer surveyed by CNBC thinks a recession can be avoided.
• The macroeconomic view of CFOs informs a bearish stock market outlook, with most expecting the Dow Jones Industrial Average to fall to 30,000 before reaching a new high, which would represent a decline of 18% from its current level.
• The CNBC CFO Council Survey is a sample of views from the C-suite at top corporations and organizations, with this quarter’s survey including responses from 22 CFOs.

Many economic prognosticators and Wall Street stock pickers have made it clear where they stand on inflation and the Federal Reserve policy response: the economy and markets will get worse before they get better. Many chief financial officers at top companies agree with them, according to the results from the latest CNBC CFO Council survey.

Over 40% of chief financial officers cite inflation as the No. 1 external risk to their business, and going deeper into the results from the Q2 survey, the links between geopolitics and food and energy prices, and inflation, are clear from the C-suite ranking of the external factors that are weighing on their current outlook. Almost one-quarter (23%) of CFOs cite Federal Reserve policy as the biggest risk factor, and as the Biden administration struggles for ways to increase oil supply and Russian ships sail with seized Ukrainian wheat amid concerns about a severe global food insecurity crisis, another 14% of CFOs cited the Russia-Ukraine war as the No. 1 business risk.

CFOs are not uniformly of the view that the Fed won’t ultimately be able to control inflation. A little over half (54%) express confidence in the the central bank, but that’s still not enough to alter their view of where current economic conditions and policy decisions are heading: into a recession.

According to the majority (77%) of CFOs responding to the survey, a recession will occur during the first half of 2023. No CFO forecast a recession any later than the second half of next year, and no CFO thinks the economy will avoid a recession.

{snip}