CEOs More Cautious, But Still See No Recession

The Conference Board measure of CEO Confidence declined in Q3, from 54 to 52, its lowest level so far this year. Still, a reading above 50 indicates that optimistic perceptions of business conditions outweigh pessimistic assessments.

The Q3 survey marks a decline in CEO optimism, which had been improving so far this year. Perceptions of current economic conditions deteriorated sharply from 54 to 48, but CEOs remain “cautiously optimistic” about the future.

Notably, the share of CEOs expecting a recession declined further to 30% in Q3, from a high of 84% in 2023. Moreover, despite a slight increase in the share of CEOs expecting to reduce headcount, most of them reported planning to either increase or keep their workforce unchanged.

CEO confidence has typically been a leading indicator of the performance of cyclicals versus defensives.

That said, investors should note that the Conference Board surveys Chief Executives of large companies. Because smaller companies account for the lion’s share of employment, the hiring intention component of the NFIB survey is a more comprehensive payroll indicator. Recent months’ upticks have not derailed it from its well-established downtrend.

CEO Confidence is likely to continue to raise earnings expectations, which are already overly optimistic, thus making equities particularly vulnerable to disappointment.

We do not concur with the no-recession CEO consensus. Investors should position defensively.