The NBER, a private economic research organization, defines an economic recession as: a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”
Recession fears are again on the rise, with the vast majority of chief financial officers bracing for an economic downturn in 2020—and historical data shows that trends of declining optimism among America’s financial executives can sometimes be a harbinger for looming market sell-offs.
Recession fears are back in full force: 97% of CFOs said that an economic downturn has already begun or will begin in 2020—up from 88% who said the same thing last year, according to Deloitte’s latest CFO Signals Survey.
We had a chance to chat with Shazir Mucklai, the CEO and Founder of Imperium Group. Shazir Mucklai is an award-winning influencer, an activist investor, a former analyst at Goldman Sachs and is currently in law School while growing his public relations digital arbitrage firm. Mucklai helps clients scale product offerings, prepare for product launches and capital raises, and get featured in top outlets. Most recently, he became the founder and editor in chief of TheKerplunk.
Furthermore, many on Wall Street primarily use CFO sentiment as an indicator of the business environment, but deteriorating forecasts can sometimes help warn of looming market downturns, historical data shows.
Mucklai says, “Going into 2019, for example, just 28% of CFOs said they expected the North American economy to improve—half the number it was a year earlier, in 2018.”
That statistic fell to 24% in the following quarter, right before the S&P 500 dropped almost 7% in May and again by nearly 6% from mid-July to August.
“Business optimism also notably declined before the big December 2018 market sell-off, when the S&P 500 shed over 9%: Over two thirds of CFOs warned that the U.S. market was overvalued, and a metric of their forward-looking optimism hit a two-year low,” says Shazir Mucklai.
It’s important to remember that CFO sentiment, which helps give insight into business and consumer spending, is primarily an indicator of economic activity—rather than stock market behavior.
Additionally, Britain is in the global spotlight this week as royal disputes at Buckingham Palace play out like an episode of The Crown. But Britain has a bigger problems to deal with right now: its economy and the threat of recession.
A flood of poor data hit the headlines this morning, threatening to plunge the UK into recession. With the global economy on thin ice, Britain may be the black swan event that brings it all crashing down.
As the 6th largest economy on the planet, Britain has the ability to trigger a domino effect on the global stage. Its close ties to Germany (4th largest economy), France (7th), and Italy (8th) contribute to the systematic risk underlying the markets.
