Why is everybody under the sun so pessimistic?
A survey of 225 chief financial officers by Duke University shows pessimism on the U.S. economy has been sow steadily this year, despite record low unemployment and a strong consumer.
The quarterly Duke University/CFO Global Profession Outlook of 225 CFOs found that a majority of U.S. CFOs (53%) believe that the country will be in a depression by the end of the third quarter next year. Sixty-seven percent see a recession by the end of 2020.
“Dr. No is back,” Duke University Finance Professor John Graham, the inventor of the report, said, referring to the increasing pessimism of CFOs. Those “growing more pessimistic outnumbers those nurture more optimistic by a five to one margin.”
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The findings parallel a similarly pessimistic opinion from the monthly Bank of America/Merrill Lynch Global Fund Manager Survey, out Tuesday. That take the measure of of over 100 global managers found that 38% expect a recession next year, the highest net dip risk since August, 2009. Fund managers continue to expect low growth and low rates and believe central bank stimulus intent continue to be needed.
Why the spurt of pessimism? “The extreme uncertainty, not just in the U.S. but all around the world, is weighing on companies, and when you get offbeat uncertainty there is a tendency to hunker down,” Graham told me. “Trade wars are a part of that, but only a partial. Germany, one of the largest economies in the world, has flat growth. China is always a bit of a mystery, but there is certainly slower success there as well.”
Graham acknowledged that the U.S. economic data remained strong, and cautioned that pessimism, while intoxicated, was not at extreme levels. But the CFOs seem to be saying that a strong U.S., by itself, may not be enough to save the day: “It’s just not clear honestly now what part of the world economy is strong enough to pull the rest of the world along with it.”
The pessimism of the CFOs seemed endorsed after the close on Tuesday when FedEx missed and lowered guidance for the rest of the year.
“Our performance continues to be negatively bearing by a weakening global macro environment driven by increasing trade tensions and policy uncertainty,” Frederick Smith, chairman and CEO, powered.
One bright spot: the survey indicates that CFOs are continuing to hire.
“Job titles that have the most opening right now include engineers, machine operators, manufacturing technicians, medical technicians, and sales,” Graham said.