Not Exactly Bullish

Chief financial officers, corporate treasurers, and other finance professionals are in a unique position. They see what is happening on Main Street's front lines. They have first-hand knowledge of what the banks are up to and day-to-day conditions in credit and other markets. They have access to raw data and strategic plans that allow them to gauge how things really are in corporate America.

With that in mind, I think most people would agree that their views should carry a bit more weight than the "smart money" types who are using cheap government loans to speculate in over-priced stocks and other risky investments and who are betting on the V-shaped recovery that ivory tower economists and Wall Street strategists love to pontificate about, but which is more permabull fantasy than anything else.

So, are the finance pros bullish? Well, not exactly (bold italics mine):

"Finance Pros Don't See U.S. Companies Hiring Until 2011"

Access to Credit Emphasizes Strategies to Conserve Cash

Significant hiring won't begin at most U.S. companies until well into 2011, even though the U.S. economy will continue its modest recovery next year, according to professionals in the finance departments of U.S. companies.

The 2010 Business Outlook Survey released today by the Association for Financial Professionals (AFP) and underwritten by Wells Fargo & Company (NYSE: WFC) shows that while more than a quarter of respondents indicate that their organizations will shrink their payrolls in 2010, 46 percent expect that their organizations' workforces will be stable in the new year.

When hiring begins, most finance professionals expect payroll growth to be modest at first. Of organizations surveyed, 25 percent anticipate returning to pre-recession staffing levels in 2011; 32 percent expect a rebound in 2012; and three out of ten do not expect their organizations ever to return their payrolls to pre-recessionary levels.

"AFP members have played a critical role in maintaining the financial stability of their organizations through the recession," said Jim Kaitz, president and CEO of AFP. "As we look ahead, AFP will continue to work with policymakers to ensure that legislative initiatives have a positive impact on potential job growth."

This is the sixth year in which AFP has surveyed its members in December to track their outlook of future business conditions.

Financial professionals are uniquely positioned to assess how business conditions will affect their organizations in the immediate and short-term, and they must make critical business decisions - including those concerning borrowing and investment - based upon those assessments. Because financial professionals work in a wide range of industries and in public and private organizations of varying sizes, AFP's survey results are accurate indicators of future business conditions.

Even if the recession might have ended by a textbook definition, nearly 90 percent of financial professionals surveyed believe that the U.S. economy has yet to enter a period of sustained economic growth. Fifty-one percent do not see economic growth beginning until the second half of 2010, and nearly a quarter do not see it happening until at least 2011.

Factors that finance professionals think will affect economic growth include consumer demand, the growing Federal budget deficit, rising health care costs and access to credit. Further, respondents agree that regulatory reforms might moderate future shocks to the economy, but these reforms also might come at a cost.

MORE CUTBACKS IF CREDIT REMAINS TIGHT

In the case of credit, survey respondents see only minor improvements in access to credit compared with this time last year. Although fewer organizations (18 percent) than in previous AFP surveys report that credit had become scarcer during the past six months, only 16 percent report that it had become more plentiful. Only a quarter of financial professionals expect their organizations' access to credit to improve in 2010.

If the ability to obtain credit does not improve by midyear 2010, then 55 percent of organizations expect to take additional actions to conserve cash, which might include:

• Reducing capital spending (68 percent)
• Freezing or reducing hiring (62 percent)
• Considering closing locations/offices (33 percent)
• Reducing current or planned inventory levels (25 percent)
• Delaying payments to vendors (23 percent)
• Tightening credit standards for trading partners (23 percent)
• Drawing on credit facilities that are still available to build cash (22 percent)

Any of these actions would be on top of the measures that 96 percent of organizations surveyed had taken since the beginning of the financial crisis in September 2008.

Comments

[Kid Dynamite]

but Michael, since we're about to roll into 2010 on the calendar, we can now price stocks off of 2011 estimates - so everything is still fine! (/sarcasm)

[Stevenfe]

Fine...let the "professionals" ramp up the U.S. Stock Market. I wouldn't touch this compromised and rigged market in any shape or form.

[Matt]

Everything seems fine, except for the job market. It appears the stock market has become used to having all these people unemployed.