Back in Q2 2020, CFOs expressed escalating worries about the economic impacts of COVID-19. In the CFO Signals mid-cycle poll, having executed a substantial reopening, CFOs were still mostly expecting safe, profitable operations as the process continued. At the same time, though, they cited sharply rising pessimism about how quickly economic activity and their own revenue could return to pre-crisis levels.
Since then, the pandemic has accelerated into the fall, US GDP has grown strongly (but not to its pre-pandemic level), and Congress still had not agreed on a new stimulus package. Adding to the volatility, and right before this quarter’s survey opened, Joe Biden was projected to have defeated Donald Trump in the US presidential election, and an effective COVID-19 vaccine was announced.
So where does this leave CFOs as they look toward 2021? A recent CFO Signals survey shows that the short answer is “concerned about the first half, but optimistic about the second half onward.” 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.
Finishing out a difficult 2020, slightly more than 40 percent of CFOs expect to achieve 95 percent or more of their originally budgeted 2020 revenue, with the average expecting 88 percent (retail/wholesale is lowest at 69 percent). 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 percent do not expect to get there until Q1 2022 or later (especially in retail/wholesale, manufacturing, and services).
CFOs mostly say their companies’ 2021 strategies will not be substantially different from pre-pandemic. There are predictably strong industry differences, but there seems to be a general trend toward M&A-driven growth, broader offerings, a smaller real estate footprint, and more diversified supply chains.
From an economic standpoint, about three-quarters of CFOs expect the US economy to improve in 2021.
From a capital markets standpoint, CFOs mostly expect rates to stay low (but are fairly split) and for bond yields to remain below 2 percent. They expect the renminbi to appreciate against the US dollar (and for its use as a trading currency to rise substantially) and for use of digital currencies for business transactions to rise. With the S&P 500 above 3,500, nearly 60 percent expect it to be higher by the end of the year—even though 80 percent also say it is overvalued.
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