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CNBC
4 hours ago
- Business
- CNBC
CEO recession expectations decline from April scare, survey says
Business leaders are walking back recessionary expectations for the U.S. that initially spiked in the aftermath of President Donald Trump's tariff announcement, according to data released Monday. Less than 30% of CEOs forecast either a mild or severe recession over the next six months, per Chief Executive Group's survey of more than 270 taken last week. That's down from 46% who said the same in May and 62% in April. The share of CEOs polled this month who said they expect some level of growth in the U.S. economy also shot up above 40%. That's nearly double from the 23% who gave the same prediction in April. Expectations for flat economic growth have surged in recent months, rising above 30% from 15% in April. That comes as some market participants question if "stagflation" — a term used to described an environment with stagnating economic growth and sticky inflation — could be on the horizon. Chief Executive's latest data reflects a shifting outlook among corporate America's leaders as they follow the evolving policy around Trump's tariffs. Many large companies have left their earnings outlooks unchanged, citing the uncertainty around what the president's final trade policy will and will not include. Trump sent U.S. financial markets spiraling in April after first unveiling his plan for broad and steep levies on many countries and territories, which market participants worried would hamper consumer spending. He placed many of those duties on pause shortly after, which helped the market recoup much of its losses. The White House has been negotiating deals with countries during this reprieve, which is set to expire early next month. The Trump administration announced an agreement with the United Kingdom and is holding talks with China in London on Monday. Talk of an economic slowdown has once again become a hot topic in corporate America. "Recession" and similar iterations of the word have come up on 150 S&P 500-listed earnings calls so far this year, about double the amount seen in the same period of 2024, according to a CNBC analysis of FactSet data. "We do recognize that sweeping changes in global trade policy could contribute to broader macroeconomic volatility, including the potential to tip certain regions into a recession," said Michael DeVeau, finance chief at International Flavors & Fragrances, on the company's earnings call last month. Firms have raised alarm that tariffs could hit their bottom lines and that they will need to pass down higher costs by raising prices. Some also said rising fears of a recession because of the levies have pushed consumers to tighten their belts financially. The University of Michigan's closely followed consumer sentiment index has plunged near its lowest levels on record as the tariff announcements rattled everyday Americans. However, a New York Federal Reserve survey released Monday paints a brighter picture. The data showed that the average consumer is growing less concerned about inflation after Trump walked back some of his most severe trade plans. "From the macro, the worst concerns, I think, have passed," Home Depot CEO Edward Decker said last month. "We've gone from a dynamic of where we were going to have a near certain recession and stock market correction in early April, to where today stock markets fully recovered (and) recession expectations are way down in the past month."
Yahoo
01-04-2025
- Business
- Yahoo
It's not just tariffs. 4 other issues are battering stock market sentiment.
Trump's trade war has rattled markets but it's not the only issue weighing on sentiment. The mood in 2025 has also been soured by weak consumer confidence and a tougher job market. The high level of uncertainty is stoking fears of a recession in 2025. Trump's trade war isn't the only thing that's derailed the stock market in 2025. While anticipated tariffs have exerted the most pressure in recent weeks, the sell-off has been accelerated by a slew of data points that suggest that the economy is on shaky footing. Here are four factors that are souring the mood among investors as the second quarter kicks off. Consumers are feeling steadily worse about the state of the economy. Consumer confidence dropped for the fourth month in a row in March, hitting its lowest level since 2021, according to the latest Conference Board Survey. The Expectations Index, a broad measure of how consumers feel about the outlook for income, business activity, and the job market, dropped to 65.1 this month, its lowest level in 12 years. That's below a key level of 80, a threshold that has typically signaled a coming recession. CEOs aren't feeling very chipper, either. According to a survey conducted by Chief Executive Group, on average, chief executives rated business conditions in March around 20% lower than conditions in January. Meanwhile, the outlook among CEOs for what business conditions will look like 12 months from now dropped 28% from levels in January, the most pessimistic business leaders have been since 2012, the firm said. The downbeat mood is palpable, and Wall Street is taking notice. "In the US, there is a clear crisis of confidence," Manish Kabra, the head of US equity strategy at Societe Generale, wrote in a note on Tuesday. "Events so far this year have led us to highlight our negative views on the Nasdaq-100 and to underline that trade uncertainty is driving our trading call for the S&P 500 to fall to 5555. Most of these events are 'known knowns'. The high-flying AI stocks that have boosted the market in recent years aren't doing so well in 2025. Even before the stiffest tariff headwinds shook up the stock market, investors were questioning the longevity of the trade. In January, DeepSeek, an AI tool from China, surprised markets with a more cost-efficient model to rival US peers like ChatGPT. Since then, investors have been left wondering why the AI "hyperscalers" — companies with big AI ambitions like Meta Platforms and Amazon — have been spending so heavily on chips and other tech. More importantly, they're wondering when they might see a return on such massive capex related to AI. The Roundhill Magnificent Seven ETF, which has near-equal positions in all the Magnificent Seven stocks, is down 15% year-to-date. By the end of last week, ever Magnificent Seven stock was negative for the year, with Meta the last of the cohort to give up its gains. Doubts have also been swirling for months on whether top AI firms, like Nvidia, will be able to keep up their chip sales in the coming years. "At the top of our list of concerns is the potential for excess comput as well as harsher than expected tariffs and/or export restrictions. We think the keys to the next major move in artificial intelligence (AI) stocks will depend on clarity from tariffs," Angelo Zino, a senior analyst at CFRA Research, wrote in a note on Monday. Inflation remains above the Fed's 2% target, with Personal Consumption Expenditures inflation, the Fed's preferred measure, accelerating 2.8% in February, up from the prior month's 2.5% yearly increase. Hotter inflation is bad news on two fronts. For one, it could mean the Fed has less room to cut interest rates this year, meaning interest-rate pressure will continue to weigh on stocks. For another, higher inflation is raising fears of stagflation, a worst-case economic scenario that describes a slowing economy with stubbornly high prices. Such a case is even harder for the Fed to deal with than a typical recession, as central bankers won't be able to cut rates to boost the economy without stoking higher prices. In a March Bank of America survey, 71% of fund managers said they saw the risk that the global economy would see stagflation within the next 12 months. The survey also found record stock selling among fund managers, with investors' allocation to the US stock market dropping to their lowest levels in about two years. "Faced with modest stagflation, we think the Fed will stay on hold," strategists said in a note. "Risks are skewed toward weaker growth and even higher inflation." Hiring isn't as strong as it's been in recent years. On top of that, DOGE-related cuts as the government pursues vast budget reduction plans is drumming up uncertainty about future jobs data. The unemployment rate remained at a historically low 4.1% in February, but continued jobless claims have climbed steadily over the past year, according to data from the US Employment and Training Administration. Layoffs also appear to be accelerating. US employers announced 172,017 job cuts in February, a 245% increase from job cuts announced the prior month, and a 103% increase from cuts announced in February of last year, according to data from Challenger, Gray, & Christmas. A weaker job market is stoking fears of a potential recession in 2025, which more forecasters on Wall Street have voiced in recent weeks. In a recent note, strategists from Goldman Sachs lowered their forecast for GDP growth while raising their forecast for unemployment and the probability of a recession this year. "We raised our 12-month recession probability from 20% to 35%, reflecting our lower growth forecast, falling confidence, and statements from White House officials indicating willingness to tolerate economic pain," the bank wrote in a note. Read the original article on Business Insider
