Inflation, stocks, tech spending – you name it. Finance executives aren’t buying a bullish 2024.
Deloitte is out with its “CFO Signals for 4th Quarter 2023”, and if the forward outlook is any guide, those green lights economists were plugging for 2024 are turning yellow fast.
The report, which tracks the mood and sentiment of U.S. chief financial officers every quarter, issues several eye-openers for the broad sector of CFOs to consider on key areas like hiring, big economic impactors, and technology spending for the rest of the year.
Here’s a snapshot of some of the more illustrative takeaways from the Deloitte survey.
• CFOs who rate the current North American economy favorably in the 4Q23 survey plummeted 10 points since the previous quarter, to 47% from 57%.
• Net optimism for CFOs’ own companies’ financial prospects also fell, to +11 from +22 in the 3Q23 survey.
• CFOs lowered their year-over-year (YOY) growth expectations for revenue, dividends, earnings, capital investment, and domestic hiring, but raised them for domestic wages/salaries.
• Slightly more than one-third (35%) of CFOs said U.S. equities are overvalued, compared to 56% saying the same in 3Q23.
• CFOs indicated Inflation/interest rates/liquidity impact, macroeconomics, and geopolitics as the top three factors that could most constrain their companies’ ability to achieve financial performance goals in the next 12 months.
• Eighty percent of CFOs said they expect their companies to embed more automation/digital technologies into their operations in 2024, while 76% expect digital transformation and technologies to play a greater role in achieving their companies’ strategy.
• Just over half (51%) of CFOs estimated 1% to 10% of their companies’ growth in the next three years to come from M&A while 19% indicated between 11% and 50% of growth could derive from M&A in that period.
• Sixty-five percent of CFOs said they expect their companies to offer a hybrid work arrangement in 2024.
Overall, 47% of U.S. CFOs cited the U.S. economy as either good or very good.
That figure is down from 57% in 3Q23. The outlook for Europe is decidedly dour, with only 9% of CFOs noting current economic conditions in Europe as good or very good, down from 11% in 3Q23.
Equally negative is China, where just 3% of respondents signaled the Asian giant’s current economy as good or very good, down from 8% in the prior quarter’s survey.
Why the downbeat outlook? Ongoing perennials like inflation, high-interest rates, and a sour mood among U.S. consumers, Deloitte says.
“At the cusp of 2024, CFOs expressed a far more conservative outlook than in the previous quarter’s CFO Signals survey, likely due to the continued impact of high-interest rates, inflation, and tensions caused by geopolitical conflict,” says Steve Galluci, national managing partner at the company. “However, their concerns are contrasted by signals that the new year will bring greater M&A activity, as well as investments in digital technologies both for strategic and operational purposes, indicating there may be a light at the end of the tunnel.”
One caveat lies with the Federal Reserve, which has hinted that 2024 should be a “pivot” year for the U.S. economic policymaker, which would impact companies in key areas like investments and mergers and acquisitions.
“Surveyed CFOs are looking to deploy capital via M&A as a growth lever in 2024,” notes Adam Reilly, a national managing partner for mergers and acquisitions at Deloitte. “This finding aligns with the results of our recent ‘2024 M&A Trend Survey: Mind the Gap.’ Should the Federal Reserve come through on expectations for reduced interest rates, that, coupled with some strategic pivots, could potentially spur more deal-making.”
Standing Pat on Tech Spending?
Perhaps unsurprisingly, given the generally bullish view on artificial intelligence and other emerging technologies, CFOs may be turning to their digital assets to get them over the hump in 2024.
“76% of CFOs expect digital transformation and technologies to play a greater role in 2024,” Deloitte says. “80% of CFOs expect their organizations to embed more automation/digital technologies into their operations in the coming year.”
Where will that cash be going? While every company has its unique challenges, some areas are going to be more prioritized than others.
“More than three-quarters of surveyed CFOs expect cybersecurity to be a top priority for the audit committee over the next 12 months, beyond financial reporting and internal controls, while indicating enterprise risk management (43%) and finance and internal audit (40%) as the next top priorities for the audit committee in 2024,” Deloitte reports.
Brian O’Connell, a former Wall Street bond trader and best-selling author, is a prominent figure in the finance industry. With a substantial background as an ex-Wall Street trader, he has authored two best-selling books: ‘The 401k Millionaire’ and ‘CNBC’s Creating Wealth’, demonstrating his profound knowledge of finance and investing.
Brian is also a finance and business writer for esteemed national platforms and publications, including CNN, TheStreet.com, CBS News, The Wall Street Journal, U.S. News & World Report, Forbes, and Fox News.
