Dow slips below 30,000, little chance of soft landing for economy;

A trader works on the floor of the New York Stock Exchange.

Lucas Jackson |: Reuters:

Every time the stock market goes down in 2022, it goes down again. Investors’ high hopes for the worst have turned into head-scratchers amid the highest interest rates in 15 years. The current year-end stock slide is just the latest example, and the sell-off isn’t over yet.

The last damage Dow Jones Industrial Average will get worse before it gets better, and even as the Fed’s fight against inflation succeeds, it will come down at the cost of a hard landing for the economy next year, according to a new survey of CFOs by CNBC.

The results of the latest quarterly survey of CFOs are no surprise. Throughout 2022, conversations with individual CFOs have often tended toward the view that the economy is headed for a hard landing. A poll of the room at the latest annual summit in Washington, D.C. on Nov. 30 found that a majority of CFOs held this view.

CNBC CFO Council 2022 The Q4 survey is a sample of the current perspective of the top financial officers. It was conducted among 23 chief financial officers of large organizations between November 30 and December 20.

Here are some details.

The recession is coming

It was noted that no more recessions have been predicted than those that have not yet hit the economy. Include CFOs in this camp of forecasters. More than 80% of respondents to the Q4 survey expect a decline in 2023. That percentage rose during the quarter as more CFOs pushed back on earlier predictions that the economy had already entered a recession. CFOs are split on timing, with equal percentages (43%) saying the downturn will occur in the first or second half of the year.

Whenever there is a recession, timing is less important than the survey results, which found that less than 10% of CFOs believe a soft landing is taking place; it’s possible.

More Dow selling

The CFO’s views on the recession spell more pain for the stock market, which ends the year with another volatile decline in value. More than half (56%) of CFOs surveyed expect the Dow Jones Industrial Average to fall below 30,000 again before it hits 40,000 for the first time, and that’s nearly triple the number of CFOs (21%) who think are the worst. for the market or decided not to call the stock in research.

But the outlook is not so bleak. In several key areas of the economy and market, CFOs believe the worst. For example, inflation.

Inflation has peaked

While it remains the top external risk factor cited by CFOs, and it was cited by more CFOs in Q4, nearly two-thirds of respondents now say inflation has peaked. And CFOs believe that despite the costs 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. CFOs who rated the Fed’s efforts to control inflation as poor fell from about a quarter of respondents in the 3rd quarter to 10% who now hold this view.

Political risks will not weaken the market

One of the reasons why inflation was cited by more CFOs as the biggest external risk factor facing their businesses; another risk fell 10% quarter-on-quarter: overregulation risk. Midterm elections and divided government may be responsible for this reduced fear.

On other important political risks on the 2023 horizon, CFOs believe the headlines will be worse than reality. The vast majority of CFOs (more than 80%) say a government shutdown is unlikely in 2023, and they also think it’s unlikely, with more than half saying it’s “very unlikely” that Congress won’t be able to raise the debt ceiling, a view. belongs to more than 90% of respondents. That mirrors the view offered by Kevin Brady, the top Republican on the House Ways and Means Committee, who told chief financial officers at the CNBC CFO Council’s annual summit in Washington that it “sparks economic fear.”

“The bottom line is that our debt will be paid on time … I don’t expect 2011 or even 2018,” Brady said.

Companies will still spend and hire

As the economic situation and the stock market have weakened this year, one consistent finding in the survey of financial instruments has been relatively stable spending and investment plans. That remains the case in Q4.

Less than a quarter of CFOs expect their company’s costs and headcount to be cut in 2023. That doesn’t mean companies aren’t being more cautious. An equal percentage (about 40%) of CFOs say their costs and staff will stay the same next year as those who expect them to increase.


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