CEOs are increasingly growing fearful of a coming recession, and some say they think the recession has already begun.
According to a survey from the Conference Board released Friday, A majority of CEOs believe their business area will be in a recession by year’s end of 2023. 60% of CEOs expect an economic contraction in their primary area of business within 12-18 months. 15% of CEOs believe their area is already in a recession.
As these opinions are manifesting, Central Banks the world over are raising interest rates as they try to combat rising inflation with aggressive regimens of tightening monetary policy. Just in the Unites States, the Federal Reserve raised interest rates on Wednesday by 0.75%, its largest increase since 1994.
As the Fed suddenly turned aggressive, in part due to suddenly dour economic reports, including an inflation report that was worse than all predictions, Wall Street was forced to confront that monetary policy was about to tighten aggressively, and the only question was how aggressively. Bank of America Global Research economists said the bank now sees a 40% chance of recession next year, as this week it slashed its US growth forecast.
At JP Morgan, strategists say there is an 85% chance of recession, just based on the metrics around the decline of the S&P 500.
This survey is reflecting what until now we have heard individual CEOs saying, such as Elon Musk’s internal email to twitter employees, or JP Morgan’s Jamie Dimone’s talk of a hurricane bearing down on our economy. Both have also taken measures to protect their respective organizations, be it Tesla’s hiring freeze, and preparations to trim 10% of their workforce, to Dimone saying, “You’d better brace yourself. JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.”
Other companies are battening down the hatches as well, with Coinbase firing 18% of staff this week, as well as Redfin and Compass trimming their workforce.
Some are still somewhat optimistic, however in these times, optimism seems to manifest as saying there is only a 50-50 chance of a recession. Morgan Stanley (MS) CEO James Gorman, one of the more optimistic CEOs, said, “It’s possible we will go into a recession obviously. There are 50-50 odds now.”
