Through the eyes of CEOs

CEOs appear to be able to navigate unchartered territory

What I’m particularly good at is identifying patterns before other people can see them. The ‘signal’ I’m looking for is often a piece of discordant data that no one else is paying attention to. But once I spot it, that blip becomes my obsession.

– Global Investment Bank CEO “Can CEOs be Undisruptable” interview respondent.¹

It is often said that hindsight affords you 20-20 vision.² And how many of us can deny that we haven’t at least occasionally longed for the ability to see into the future—particularly in these unusually unpredictable times?  Indeed, this concern over the uncertainty of what lies ahead came out loud and clear this past June in the Summer 2022 installment of the Fortune/Deloitte CEO survey series.  When asked what they believed to be the biggest challenge facing today’s CEO, Uncertainty (along with Volatility) rose to the top of the list in Summer of 2022 (see figure 1).³ Uncertainty remained at the top of the list as a challenge in the 2022 Fall survey as well.

Given the seemingly never-ending flow of disruptions confronting the world today, it shouldn’t come as a surprise to see this continued concern over uncertainty of the future mentioned in both the Summer and more recent Fall survey.  However, despite the uncertainty, the surveys showed that today’s CEOs appear to be able to navigate unchartered territory with their insight and resilience.  As we uncovered in our prior research, CEOs are masters at “disruptive jujitsu.”⁴  That is, they consistently exhibit the uncanny ability to recognize patterns across disruptions often missed by others and, even more, identify opportunities within adversities.⁵

Figure 1: Summer 2022 Survey biggest challenge(s) facing today’s CEO⁶

The collective insights of CEOs on what the future may hold

Could it be that CEOs possess a unique skillset?  And what might their collective insights have to say about the future outlook?

In the Fall 2022 installment of the Deloitte/Fortune CEO survey, we asked CEOs to provide not just their outlooks for what they believed the future to hold for their own organizations and industries over the next twelve months, but also their more near-term predictions for where they believed certain key economic indicators (Inflation, Federal Funds Rate, and the S&P 500) would be at year end (December 31, 2022), or approximately three months out from the time the survey was fielded. (See Fall Survey callout below for survey details).

What we heard: CEOs were moderately bullish on how things will likely look at year end

When asked to provide their best prediction regarding the various indicators, the answers of the CEOs, indicate they anticipate a moderately improving landscape.

Specifically, on average, CEOs predictions show modest improvements across all three indicators i.e., inflation to decrease, Federal Funds Rate to increase and the S&P 500 to flatten.  (See figure 2).

Figure 2: Surveyed CEO Economic Indicator predictions: Inflation⁷ Fed Funds Interest Rate⁸, S&P 500⁹

CEOs are optimistic that the inflation rate will decrease to 7% by year end

When asked about their expectations for what the annual inflation rate would be by year end, CEOs predicted it would decrease from the provided reference rate (8.3% Year over Year as of August 2022), ¹⁰ with the average (both mean and median) prediction being 7%. While, at the time of this writing, ¹¹ inflation has come down slightly (7.7% year over year as of October 2022), ¹² it still has a way to go (0.7%) to meet the CEOs’ average prediction.  Moreover, while it is heartening to see that inflation predictions are down from the current/reference rate, this expectation is much higher than expectations from nine months ago (4-5% average). Specifically, in the Fall Survey, over half (58%) of respondents predicted inflation would be greater than or equal to 7%, as compared to only 4% of CEOs in the January 2022 survey predicting it to be at this level at year end.¹³

CEOs expect a deceleration in the Federal Fund interest rate increase

At the time of the Survey, the Federal funds interest rate was steady at 3 – 3 ¼ %, a rate set in late September 2022. A 0.75 point rate hike in early November, combined with an increasingly low expectation of an additional 0.75 increase (which was not yet clear at the time of the survey), while potentially resulting in a year-end rate above the CEO (median) prediction of 4.0%, seems to confirm, directionally, the CEO expectation of rate increase deceleration.

S&P 500: Barely bearish but decisively (and, at the time, contrarily) not off the rails

While CEOs’ predictions now appear overly conservative, given the recent increase in the S&P, it is worth pointing out that the reference point provided, 3655.04, was from September 26, 2022, and the survey was fielded shortly after this date. This time period turned out to be around the time of the lowest S&P market rate on record for 2022.¹⁴

Specifically, on average, they predicted the S&P to decrease slightly from the reference point at the time of the survey (3655.04), to around 3,600.  The S&P has since that time rebounded to a level over 3,900 at the time of this writing.¹⁵

Accurate predictions are nice, but their real value is derived from informing better decisions

Notwithstanding, while CEOs may continue to be a source of insights about the overall economy and we hope that their predictions may represent an additional valuable input into the strategic planning process, we emphasize that the CEO’s role will continue to focus on building robust strategies under uncertainty rather than reading a “crystal ball.” We welcome any ideas regarding what other metrics or economic indicators we should consider asking for input on from CEOs.

About the Fortune/Deloitte Fall 2022 CEO Survey

121 CEOs representing more than 15 industries participated in this Fortune/Deloitte CEO Survey. 90% of respondents were based in the United States, and 10% were based outside the United States.  This Fall 2022 survey is the eighth edition of the Fortune/Deloitte CEO Survey series. 

Fielded September 28-October 6, 2022, the survey consisted of questions intended to explore CEO perspectives and predictions regarding growth, the economy, the evolving talent landscape, artificial intelligence, and the importance of trust in employee and customer relationships. Surveyed CEOs include Fortune 500 CEOs, Global 500 CEOs, and select public and private CEOs in the global Fortune community.

¹ How CEOs can respond to disruption with new leadership models | Deloitte Insights

² NewspaperArchive® |hindsight-20 historic newspaper articles Van Nuys news (accessed 10/ 26 /2022 11:49 am)

³ 2022 CEO Priorities Survey | Deloitte US

⁴ Disruptive jiu-jitsu: The foresight and courage to disrupt the disruptors | Deloitte Insights

⁵ How CEOs can respond to disruption with new leadership models | Deloitte Insights

⁶ Source: Deloitte / Fortune Summer 2022 CEO Survey.

⁷ Inflation reference rate reference source: https://www.bls.gov/cpi 

⁸ Federal funds interest rate reference source: Effective Federal Funds Rate - FEDERAL RESERVE BANK of NEW YORK (newyorkfed.org)

⁹ S&P 500 reference source: http://www.wsj.com; Chart Source 2022 CEO Priorities Survey | Deloitte US

¹⁰ https://www.bls.gov/cpi

¹¹ November 14, 2022 / wsj.com (note: as of 11/14/2022: S&P at market close = 3957.25)

¹² https://www.bls.gov/cpi

¹³ Fortune Deloitte Winter 2022 CEO Survey

¹⁴ The Stock Market Dropped to Its Lowest Level in 2022. Here’s What Experts Predict for the Rest of the Year | NextAdvisor with TIME

¹⁵ The Wall Street Journal - Breaking News, Business, Financial & Economic News, World News and Video (wsj.com) (3,830.60 as of close of market October 26, 2022).