Dec 9, 2020 - Economy

CFOs' stock market warning

Data: Deloitte CFO Signals; Chart: Axios Visuals
Data: Deloitte CFO Signals; Chart: Axios Visuals

80% of CFOs say the stock market is overvalued, according to Deloitte's quarterly survey of Fortune 500 executives out this morning.

Why it matters: The share fell by 4 percentage points from last quarter. Still, it remains among the highest levels in the survey’s history.

  • 15% of CFOs said the U.S. equity market was neither overvalued or undervalued — slightly higher than last quarter, but well below the recent peak of 44% who said the same in early 2019.

What they’re saying: “[T]o the extent that they believe it’s valued properly or overvalued, that’s going to have an impact on how aggressive they are with respect to funding acquisitions through equity,” Deloitte’s Steve Gallucci told reporters on Tuesday.

  • “I think many CFOs believe that at one point in time we’ll have a pivot where the capital markets will be more aligned with the real economy.”

Details: The majority of CFOs (60%) expect the stock market to be higher by the end of the year.

On the economy: 18% rate the North American economy as good, while 26% say it is bad (an improvement from the 60% who called it bad last quarter).

  • 59% expect better conditions next year — up from the 43% in Q3.
  • Perceptions of China’s economy exceeded those of North America for the first time in Q3 — and the gap widened this quarter. Nearly half cite good conditions now, and 60% expect better conditions next year.
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