Key takeaways
- News of an effective vaccine seems to be driving a general belief that, despite a grim outlook for winter virus infections, broader vaccine availability later in the year provides a light at the end of the proverbial tunnel.
- CFOs overwhelmingly support a stimulus package, infrastructure investment, de-escalating U.S.-China trade tensions, less protectionist trade, and the federal government leading a COVID-19 response.
- Just over 40% of CFOs expect to achieve 95% or more of their originally budgeted 2020 revenue, with the average expecting 88%.
- Nearly two-thirds of CFOs do not expect pre-crisis operating levels until at least the second half of 2021, and 26% do not expect to get there until 1Q22 or later.
- From an economic standpoint, about three-quarters of CFOs expect the U.S. economy to improve in 2021, with the outlooks for Canada and Mexico also mostly positive.
Why it matters to CFOs?
Each quarter, CFO Signals tracks the thinking and actions of leading CFOs representing North America’s largest and most influential companies. Since 2010, the survey has provided key insights into the business environment, company priorities and expectations, finance priorities and CFOs’ personal priorities. Participating CFOs represent diversified, large companies averaging more than $10 billion in annual revenue.
Economic expectations for 2021
This quarter, just 18% of CFOs rate the North American economy as good, but 59% expect better conditions in a year. Europe was flat at 5% and 37%, respectively, and China improved markedly to 47% and 60%. On a positive note, 76% of CFOs expect the U.S. economy to improve in 2021 — reassuring but not surprising given how it fared in 2020. Nearly 70% expect a vaccine to bolster the economy by mid-year. However, only 19% expect the economy to grow faster over the next five years than pre-pandemic — when the economy was slowing.
Government policy views
CFOs overwhelmingly support a stimulus package, infrastructure investment, de-escalating U.S.-China trade tensions, less protectionist trade and the federal government leading a COVID-19 response. CFOs indicate a bias toward a smaller, targeted stimulus package over a large, comprehensive package like the CARES Act. They are largely mixed on whether higher corporate tax rates would reduce their capital spending and on whether tax incentives would influence their onshoring/offshoring decisions. When it comes to trade, most CFOs say the protectionist policy is not beneficial for their companies, and most prefer de-escalation of U.S.-China trade tensions. More than one-third, however, say confronting China on their trade practices would be good for their company. CFOs overwhelmingly say the federal government should lead strategy and investment in response to COVID-19.
2020 targets and expectations
Finishing out a difficult 2020, just over 40% of CFOs expect to achieve 95% or more of their originally budgeted 2020 revenue, with the average expecting 88% (Retail/Wholesale is lowest at 69%). Consistent with their near-term COVID-19 worries and hopes for a broadly available vaccine later next year, nearly two-thirds do not expect pre-crisis operating levels until at least the second half of 2021, and 26% do not expect to get there until 1Q22 or later (especially in Retail/Wholesale, Manufacturing, and Services).
Key quote
“CFOs have been critical to helping their companies reformulate and adapt their plans throughout nine of the toughest months in recent history—and the process continues. Nearly two-thirds of CFOs say they do not expect to return to pre-crisis operating levels until the second half of 2021 or later, and 26% do not expect to get there until 1Q22 or later.”
– Steve Gallucci, national managing partner, U.S. chief financial officer program, Deloitte LLP
Expected timing to near-normal operating levels
Back in May, 32% of CFOs expected to be back to a pre-crisis level of operations by the end of 2020, and 42% said so in August. Now, just 18% say so. Fifty-seven percent expect to reach the milestone in 2021 (mostly in the second half of the year), and 26% say 2022 or later.
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2021 capital markets expectations
CFOs mostly expect the federal funds rates to stay low (but are split) and expect bond yields below 2%. They expect the renminbi to gain on the US dollar and for its use as a trading currency to rise substantially; expectations for the euro and digital currencies rose as well. With the S&P 500 now above 3,500, nearly 60% expect the index to be even higher by the end of the year—even though 80% also say it is currently overvalued.
Hopes for Washington over the next four years
CFOs’ hopes for Washington center largely on cooperating to get important things done and unifying the country with moderation, transparency and decency. CFOs voiced very strong hopes for improvement in Washington’s accomplishments and tone. Nearly two-thirds mentioned hopes related to bipartisanship, cooperation and compromise — with a heavy focus on the desire to get important things done for the good of the country and economy. More than half expressed hopes for strong leadership and unification, with less divisiveness, more transparency and stability, more civility and more moderation. They also mentioned desires for better policy consistency and clarity — especially around international relations and trade policy.
Methodology
Each quarter, CFO Signals tracks the thinking and actions of CFOs representing many of North America’s largest and most influential organizations. This report summarizes CFOs’ opinions in four areas: business environment, company priorities and expectations, finance priorities and CFOs’ personal priorities.
The CFO Signals survey for the fourth quarter of 2020 was conducted during the period opening Nov. 9, 2020 and ending Nov. 13, 2020. A total of 148 CFOs responded. This survey seeks responses from client CFOs across the United States, Canada and Mexico. All respondents are CFOs from the U.S., Canada and Mexico. The vast majority are from companies with more than $1 billion in annual revenue. Participation is open to all industries except for public sector entities.
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