- Stocks in the first quarter took most investors by surprise as they bet the Fed is nearing the end of its rate hike cycle, led by a tech bull market.
- Is it a temporary meltdown? Based on the history of the S&P 500, traders prefer what they see in technical data, supporting more profits.
- But the chief financial officer remains wary of the Dow’s new bull market idea and believes the economy is headed for recession, according to a new CNBC survey.
When markets are in turmoil, investors tend to flee to assets expected to hold or rise in value, such as gold, the Japanese yen, and government bonds.
Drew Angerer | Getty Images
The stock market’s performance in the first quarter came as a surprise to many investors, with the Nasdaq recording a bull market size rebound. Is it just a meltup, or a stock market move without a strong economic foundation?
Traders love what they see in market history, and the S&P 500 has had such a strong year since the start of Q1. The Federal Reserve’s judgment that it is nearing the end of its rate-hiking cycle has also helped change the narrative for equities. one year ago.
Stocks appeared to extend their four-day winning streak again on Tuesday. , and both posted quarter-over-quarter gains of more than 20%, dominating the S&P’s market-weighted approach. 500 index. Meanwhile, bets that the Fed could cut rates by the end of the year have resulted in both half-full and half-empty discussions of the glass. reverse course.
Chief financial officers of big companies are still in a half-empty camp, according to a new quarterly survey. CNBC CFO Council Despite market recovery and hints that pressure from the Fed may soon abate, the CFO outlook has changed little quarter to quarter, so ‘yet’ is the operative word.
CFOs, by the nature of their position, tend to be risk-focused and less likely to jeopardize their forecasts as a result. His quarterly CNBC CFO Council survey is a sample of the views of corporate chief financial officers across the economy, and this quarter’s survey includes: between March 17th and his March 28th Includes responses from his 30 collected CFOs.
Last quarter, more than half of CFOs said the Dow Jones Industrial Average was likely to break below 30,000 before reaching new highs. Even fewer of his CFOs this quarter rated him more likely to hit a new Dow high (<15%) than he is likely to fall below 30,000 (57%) . Compared to the last quarterly survey, uncertainty has increased within this C-suite group, with nearly a third saying they are unsure about the next trend in equities.
A few more CFOs now believe in a soft-landing scenario compared to last quarter, but the majority (over 80%) still expect a recession. In our last survey, CFOs were evenly split on whether the recession will start in the first half or second half of the year, with about 40% in each camp. The resilience of the economy so far has pushed the recession timeline a bit off, as expected. More than half (56%) now expect a recession in his second half of 2023, and just over a quarter of his CFOs have postponed their recession forecast to his first half of 2024.
This cautious view of the economic outlook is consistent with a small but tangible shift in the balance of risks that CFOs focus on. Fewer CEOs named both ‘inflation’ and ‘Federal Reserve’ policies as the biggest risks facing their businesses this quarter, but more said consumer demand. Some risks seem to have disappeared entirely. For the first time in many quarters, no CFO listed the war between Russia and Ukraine or the coronavirus as their top concerns.
More CFOs believe inflation has peaked. That survey has risen from less than 50% to about 75% today in three consecutive quarters. This is in line with the majority of Fed CFOs doing a “good” or at least “fair” job in fighting inflation. However, the latest inquiry comes just ahead of his surprise OPEC+ decision to cut oil production on Sunday, adding a new factor to the fight against inflation.
In any case, the survey shows inflation won’t return to near the Fed’s 2% target anytime soon. More than half of CFOs predict that inflation will not return to 2% until 2025. Some are not convinced that a return to more typical inflation in 2025 is a safe bet.
The Federal Reserve (Fed) is seen by the market (based on its own comments and analysis) as nearing the end of its rate hikes, but CFOs’ view of yield hasn’t changed quarter to quarter. yeah. Less than 10% of his CFOs said he expects 10-year Treasury yields to be lower than they are now by the end of the year, down slightly from their view in the last survey. CFOs were fairly evenly split between those who expect 10-year yields to be in the 3.5% to 3.99% range and those who expect them to be above 4% by the end of the year, at 46% each. .
