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CFOs around the world seem to be souring on the economy, and their worry is increasing, according to a new survey.
Only 34% of CFOs surveyed in Deloitte’s CFO Signals Q2 2023 2Q Report said the economy is “good now,” a number that was near 80% in Q3 2021. CFOs don’t think the future looks great either: Deloitte also found that just 34% of CFOs surveyed said the North American economy will be “better in a year,” down from 54% in Q1.
And as low as the North American numbers are, sentiment about the economy outside North America is worse; no other country or region considered in the survey beat the North American sentiment on either current or future economic conditions.
The vast majority of CFOs surveyed pointed blame in the same direction: “81% of CFOs put economic/financial market risks at the top of their organizations’ most worrisome external risks,” Deloitte reported.
Tough money. That corresponds to a major drop in how CFOs rank their financing options, a number that’s held relatively steady in the last year. Asked what financing options they consider attractive, only 24% of CFO respondents found equity financing appealing, a number that was consistently above 50% in 2021.
The proportion of CFOs finding debt financing attractive has hovered between 16% and 19% for a year, more or less corresponding with the Federal Reserve’s rate hikes; that number was often above 80%, and never below 60%, from 2016 until the first quarter of 2022.
NIMBY. The CFOs’ views about their own companies and how to run them followed the downward drop in sentiment, to a degree. The numbers show their “own-company net optimism” took a dive in the quarter, as did their domestic hiring.
And yet, looking back, despite a year in which interest rates skyrocketed and geopolitical risk dominated headlines, CFOs told Deloitte they’ve weathered the storm of the past 12 months relatively well. Deloitte’s “performance index,” which tracks the average percentage of CFOs who state they’ve had positive year over year revenue and earnings growth, rose slightly.
Educated guessing. It’s possible that CFOs are just an Eeyore-ish bunch, however. On the question of whether they consider US equity markets overvalued or undervalued, CFOs have shown they often expect worse than the rest of the financial world: Going back to the first time the question was asked seven years ago, most CFOs surveyed haven’t thought stocks were undervalued, even though the S&P 500 has essentially doubled over that time period.
For those who play the markets, there are some interesting trends there: A majority of the CFOs surveyed—and sometimes 80% or more—believed markets were overvalued in most of the first 23 quarters in which the question was asked. Their sentiment that the market was overvalued peaked in January 2022 when the recent bull market did. Since Q3 2022, fewer than 40% consider the market overvalued.