Does Fed’s dovish tone reduce threat of recession?

NovaPoint Capital Joseph Sroka and Hudson Valley Investment Advisors’ Gus Scacco on the state of the markets, the fallout from Wells Fargo CEO Tim Sloan stepping down and the outlook for the U.S. economy.

An economic slowdown is coming, and soon – that’s according, at least, to a group of U.S. CFOs who think the nation will enter a recession by the third quarter of 2020.

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About 67 percent of CFOs surveyed by the Duke University Fuqua School of Business believe the nation’s economy will enter a recession by the latter half of 2020, while close to 38 percent are predicting a recession by the first quarter. About 84 percent, meanwhile, believe a recession will have started by the first quarter of 2021, according to the study, which was published Wednesday morning.

“I think we’re at the stage of the recovery, and there are enough uncertainties out there, that I think a recession is out there on the horizon,” said John Graham, a finance professor at Duke and director of the Global Business Outlook survey. “it’s just kind of a matter of how far off at this point.”

The most accurate indications that a slowdown is coming are GDP growth, consumer spending, commodity prices and interest rates, according to the survey. Almost half (47 percent) of CFOs said they consider GDP growth to be one of the three most important indicators of their own firm’s success.

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“What we’re saying here is that if consumer spending were to take a negative turn, or if commodity prices, or interest rates, that might be what pushes us into the recession sooner rather than later,” Graham told FOX Business.

In the fourth-quarter of 2018, the U.S. economy grew at 2.2 percent, according to a second GDP reading. And GDPNow,  a real-time tracker monitored by the Federal Reserve Bank of Atlanta, is estimating first-quarter growth to be 2.3 percent.

Despite the somewhat-negative outlook on the recession front, most CFOs anticipated an increase in capital spending and a 5 percent boon to revenue over the next 12 months. They also said they expected a 2 percent increase in hiring, and a 3 percent jump in wages as a result of low unemployment.

“CFOs are fully aware that we’re kind of due for a recession in a way, and they’re aware of what the risk factors are that would cause us to take that negative turn,” Graham said. “Now of course they’re hopeful we won’t have a recession. They’re running their businesses the best way they can in our current situation — one of moderate growth, which is great. But the dark clouds are out there.”

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The survey includes responses from more than 1,500 CFOs, with 469 from North America.