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Market News Bad dollar! Most top CFOs expect U.S. recession in first half of next year, U.S. stocks will fall

Bad dollar! Most top CFOs expect U.S. recession in first half of next year, U.S. stocks will fall

At a time when high inflation has become the number one business risk, none of the CFOs surveyed by CNBC believe a recession can be avoided. CFOs' views on the macro economy portend a gloomy outlook for the stock market. Most expect the Dow Jones Industrial Average to fall to 30,000 before making a new high, implying a 9% decline from current levels and an 18% decline from its 2022 high. CNBC's CFO Council Survey, which sampled the views of executives at top companies and organizations, included responses from 22 CFOs in this quarter's survey.

2022-06-10
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Many economic forecasters and Wall Street stock pickers have made clear their stance on inflation and the Fed's policy response: The economy and markets will get worse before they get better . The latest findings from CNBC's CFO Council show that the CFOs of many top companies share this view.

More than 40% of CFOs rank inflation as the number one external risk to their business. Digging into the Q2 survey results, it’s clear from executives’ rankings of external factors affecting their current outlook that geopolitics, food and the link between energy prices and inflation. Nearly a quarter (23%) of CFOs see Fed policy as the biggest risk factor, a Biden administration struggling to figure out ways to boost oil supplies, and a Ukrainian seizure when Russian ships are loaded amid fears of a severe global food insecurity crisis CFOs cited supply chain disruption (14%) and the Russian-Ukrainian war as their number one business risk when it came to growing wheat.



Not all CFOs believe the Fed will ultimately be unable to control inflation, with just over half (54%) saying 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, namely a recession.

The majority (68%) of CFOs surveyed said a recession will occur in the first half of 2023. None of the CFOs predicted a recession later than the second half of next year, and none believed it would be avoided .

A sample of top CFOs' current outlooks is CNBC's Q2 Survey of the Governing Council, which was conducted between May 12 and June 6 among 22 CFOs at major organizations.

41% of CFOs said the yield on the 10-year Treasury note has doubled this year to about 3% and is expected to reach 4% by the end of 2022. The same percentage of CFOs expect the 10-year yield to be no higher than 3.49% by the end of the year. But on the margins, there are concerns that yields will rise even faster, with some outsiders at the council expecting the 10-year yield to rise above 4% by year-end.

With inflation rising and interest rates rising, 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 9% from current levels and 18% from its 2022 high %. In a market where every rebound is likely to be a "dead cat", more than half (55%) of CFOs say the current bellwethers will stay in place and energy will be the growth driver for all sectors of the economy over the next 6 months The fastest industry .



US Dollar Index Daily Chart
GMT+8 June 10th 11:50 US dollar index reported 103.1799

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