A new survey of America’s chief financial officers shows that business leaders are increasingly pessimistic about the state of the U.S. economy.
97% of surveyed CFOs stated that an economic downturn has already begun or will begin in 2020 – and historical data has shown that these predictions are often harbingers of market decline.
Market experts rely on CFO opinions to help assess the overall business climate, but in recent years, these predictions have carried more weight.
At the outset of 2019, only 28% of CFOs predicted substantial growth to the American economy. That number dropped to 24% during the following quarter, accompanying a 7% dip in the S&P 500 in May.
These trends were similar in the fourth quarter of 2018, just before the market sell-off in which the S&P 500 dropped over 9%.
At the time, more than two thirds of CFOs warned that the market was overvalued and predicted a financial decline.
The correlation is unsurprising for those who have followed CFO expectations over the last decade.
Just before the 2008 financial crisis, CFO sentiment was similarly anxious about the future; pessimistic CFOs outnumbered their optimistic counterparts at a ratio of four to one.
After the recession, CFO growth expectations reached their lowest levels in five years just before the market crashed by 10% in the third quarter of 2015.
The relationship between CFO predictions and the economic climate is striking, but it’s also important to remember that this data is more helpful in indicating economic activity than in suggesting stock market trends.
Studying surveys of CFO opinion is most helpful in conjunction with an examination of hard economic data; when combined, they offer insights into predicted earnings for American workers.
In a recent survey, two thirds of CFOs stated that the state of the American economy after 2020 will depend significantly on the outcome of the presidential election, the result of which will determine trade policy and international economic partnerships for the next four years.