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Sunday, May 9, 2021

What do CEOs actually think is going on?

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Declining to rely on daily updates, CEOs around the globe give little weight to statistics that seem to indicate an inevitable slowdown in growth. But some executives seem to be inclined to believe that there’s a group of extraordinary events weighing on the business cycle, while others believe it’s business as usual.

“We’re approaching an inflection point,” Sheryl Sandberg, chief operating officer of Facebook, said in a recent earnings call. “It’s impossible to know when exactly the exact inflection point will occur.”

The saying has been coined in the wake of news of sinking markets, rising unemployment and surging interest rates, which followed Brexit, Italy’s political crisis and President Trump’s tariff orders. The latest data show a big problem with the stock market: Equities declined for an eighth consecutive week. To some CEOs, the trouble is just beginning, and it could be far greater in the future.

The Federal Reserve, for its part, has said it is fairly certain the economy is still strong, despite recent weeks of losses. Bloomberg’s editors questioned the Fed on this view in a recent editorial.

Others see a bigger issue, and they would like to see President Trump bring the deficit and debt under control to address it.

“I am really at a loss when to tell you what the macroeconomic impact of all this is,” Peter Thiel, co-founder of PayPal and head of The Founders Fund, a venture capital firm, said in an interview on Bloomberg TV. “I’m certain a lot of people are not clear on how serious a risk this is.”

If America’s economy feels uncomfortably slow, the story is worse outside of the United States.

On Monday, Brazil’s president Michel Temer acknowledged a massive recession, and Argentina’s stocks and currency are all lower than they were one year ago. As a result, Goldman Sachs Group analysts are lower in their rate outlook.

“Over the past week, we’ve seen weaker leading indicators in Brazil, Argentina, China, and the U.S., as well as increasingly negative relative economic outlooks,” James P. Stanley, a senior research analyst at Goldman Sachs, wrote in a report.

A small one-year upturn can be chalked up to unexpected holiday demand and a late boost from tax reform and a strong labor market, JPMorgan Chase & Co. analysts wrote in a note. But more often, the onset of a major downturn is unexpected. A Reuters/Ipsos poll showed a record 72 percent of Americans in October are not confident that economic growth is sustainable, and 60 percent of Americans say the stock market is too high.

Attitudes like these have some investors more cautious, in much the same way they’ve always remained cautious despite this summer’s escalating trade wars, concerns over terrorism, the recent Spanish-Catalan referendum, a precarious government and the threat of a European recession.

So, will it take more than the usual slow pace and poor stock market performance to change business leaders’ minds? Not yet, according to Aengus Kelly, chief executive of Cheddar, an online news network.

“Where I used to think the end of the world is when rates rise, now I’m a little more like that the end of the world is when the go-go companies start running out of money and the brave new world of value investing starts to kick in,” Mr. Kelly said.

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