Majority of U.S. CFOs Expect Recession

​I have always been more of a Cassandra than a Pollyanna when it comes to the future prospects for the economy. I guess that comes from the experiences of living through the economic problems/crises of the late 1980s and the Great Recession. It's not that I always expect the economy to do worse, but rather it is he understanding that recessions seem to come upon us suddenly and before we expect them. It is only in hindsight that we see how the downturn was being baked into the cake while the economy was seeming to prosper.

Early this year business sentiment was very positive, particularly in the wake of the tax bill that lowered corporate rates. Markets surged and the unemployment rate fell to record reported lows. Wages began to rise and inflation finally began to pick up. It is remarkable though, how quickly sentiment changes when the stock market tanks.

I think that we are finally entering a recession. The worrisome indicators such as the flattening yield curve, weak commodity prices (especially oil), and trade disruptions are finally being weighed more heavily. Most importantly, expectations have changed. Expectations drive behavior, and convert themselves into self-fulfilling prophecy. Of course, no one can say how deep it will be or how long it will last. It depends on how we act and react to it.

This is my bullet point list of observations about economic downturns:

• Recessions always occur sooner than most people expect.
• Measures of economic activity are retrospective. When we talk about growth, inflation, and unemployment rates we are looking in the rear view mirror.
• We don't know we are in a recession until after it has begun (Thank you, Captain Obvious!).
• It is not "different this time". It never is.
• Pay attention to flat and inverted yield curves. It is not different this time.
• The best time to prepare for the next recession is while the expansion is going strong.
• The best time to prepare for a resumption in growth is during the recession. This is only possible if you were prepared to survive the recession.
• What we do collectively through fiscal and monetary policy, and individually as business leaders and consumers can make things better or can make things a lot worse.
• The recession will not last forever. Neither does the expansion.
• Not everyone can be a contrarian, but you can be one.

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Dwayne Kolly
Chief Financial Officer
Business Bank of Texas, N.A.
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Original Message:
Sent: 12-12-2018 17:33
From: Barb Rehm
Subject: Majority of U.S. CFOs Expect Recession

More than 80% of U.S. CFOs think the U.S. economy will be in a recession by the end of 2020 while almost half are predicting one will hit next year, according to The Wall Street Journal. "All of the ingredients are in place: a waning expansion that began in June 2009-almost a decade ago-heightened market volatility, the impact of growth-reducing protectionism, and the ominous flattening of the yield curve," said Campbell Harvey, a director of the Duke University/CFO Global Business Outlook survey released Wednesday.

How does this align with the expectations of the CFO participants of Peer Intelligence?

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Barb Rehm
Senior Managing Director
Promontory Interfinancial Network
Arlington VA
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