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CFOs Express Cautious Outlook Amid Trade Concerns and Economic Uncertainty
The stock market kicked off the week with a brief relief rally, buoyed by remarks from the Trump economic team indicating a potentially softer approach to tariffs. However, this optimism has not translated into widespread confidence among corporate executives, who remain wary of the impact of ongoing trade disputes and the administration’s broader economic strategy.
Many leaders in the corporate world are grappling with the implications of a trade war and are concerned about the ideological trajectory of U.S. economic policy under the current administration. Mixed messages from President Trump regarding tariffs have further complicated businesses’ ability to plan effectively.
The prevailing sentiment among executives appears to be one of returning pessimism, as indicated by the latest quarterly survey from the CNBC CFO Council for Q1 2025. While some chief financial officers acknowledge that Trump is following through on campaign promises, many express dissatisfaction with the methods being employed to achieve these goals.
One CFO encapsulated this frustration by stating that the situation is “too chaotic for business to navigate effectively.” Others described the current environment with terms like “extreme,” “disruptive,” and “a wild ride.”
The survey results reveal that a significant majority of CFOs (60%) anticipate a recession in the latter half of the year, with an additional 15% predicting that a recession could materialize in 2026. This marks a sharp contrast to perceptions from just a quarter ago, when only 7% of CFOs associated the potential for recession primarily with the Federal Reserve’s efforts to control inflation.
As fears of economic downturn have intensified, recent data indicates that the likelihood of a recession is now viewed as a serious concern, with financial institutions estimating odds as high as 50%. New indicators are being developed to monitor recession risks, and recent surveys of money managers and economists reflect a significant rise in concerns about economic stability.
The CFO Council, comprised of financial executives from large organizations across various sectors of the U.S. economy, included 20 respondents in its Q1 survey conducted from March 10 to March 21. According to the findings, U.S. trade policy is the predominant factor driving the expectation of economic downturn. CFOs identified it as the top external business risk (30%), followed closely by inflation (25%) and consumer demand (20%). Notably, consumer confidence regarding income, employment, and business prospects has hit a 12-year low.
A striking 90% of CFOs believe that tariffs will contribute to “resurgent inflation.” As worries about rising costs mount, their expectations regarding the Federal Reserve’s ability to lower inflation back to its 2% target have been continually pushed further into the future. While Fed Chair Jerome Powell has indicated that any inflationary impacts from tariffs may be “transitory,” half of CFOs now project that the target rate may not be achieved until the second half of 2026 or even 2027.
The pressure on U.S. treasury bond yields is likely to persist, with 65% of CFOs predicting that yields will remain in the 4% to 5% range by the end of 2025. About half of them expect yields to align towards the lower end of that spectrum, consistent with current 10-year treasury rates.
As various industries look to the administration for tariff exemptions that serve their interests, a noticeable shift in sentiment was evident in the latest survey regarding stock market predictions. Traditionally, CFOs would identify sectors such as technology, healthcare, or energy as having the most robust growth potential. However, this quarter, a majority responded with uncertainty, choosing “Don’t know” as their answer.
Moreover, few CFOs foresee a swift recovery in the stock market, as 90% indicated that the Dow Jones Industrial Average is more likely to retest the 40,000 mark before attempting to reach 50,000, suggesting a possible decline in the index.
This cautious corporate outlook was further reflected in a shift in planned capital expenditures, with the percentage of CFOs intending to increase their spending for the year declining from the previous quarter. Though the drop was not drastic (around 10%), it signals a trend of concern. While a larger share of respondents anticipates maintaining current spending trends (45%), more CFOs still expect increases (35%) compared to those predicting reductions (20%).
Overall, 95% of CFOs acknowledged that policy uncertainty is influencing their business decisions. Most notably, when asked about their perceptions of the U.S. economy, 75% of respondents expressed a sense of “somewhat pessimistic” regarding its overall state, despite 75% maintaining optimism about their respective industries.
In the event of a recession, the outlook may not be entirely bleak, as 90% of CFOs believe it would be either moderate (50%) or mild (40%). Yet, the corporate community remains divided on the future trajectory, reflecting a mix of apprehension and uncertain expectations.
One CFO remarked, “I feel the current administration is seeing how far they can push before anything breaks,” expressing hope that conditions will stabilize after the initial phases of the administration. In contrast, another CFO summarized the situation as “complete chaos, without an end game strategy.”
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