A CNBC survey reveals that top CFOs are optimistic about the Dow and pessimistic about the Fed, with their views aligning with recent trends.

• The latest quarterly survey of the CNBC CFO Council shows that CFOs are optimistic about the Federal Reserve's ability to achieve a "soft landing" for the economy, with an increasing number of them expressing positive views on its performance.
• Although chief financial officers anticipate that inflation will surpass the Fed's target of 2% until at least 2025 and a considerable number of CFOs predict the central bank will not start reducing interest rates until September.
• The CNBC CFO Council Survey is a quarterly survey of views from a select group of over 100 CFOs who are members of the council.

Large corporations' chief financial officers view a robust U.S. economy and stock market, despite concerns about inflation and a possible overconcentrated and extended bull run in equities.

According to the CNBC CFO Council Survey for Q1 2023, CFOs' views about the Federal Reserve's inflation battle have undergone a significant shift. The percentage of CFOs who believe the Fed will achieve a soft landing has reached a five-quarter high of 48%, marking a significant change from the same time last year when expectations of a soft landing were only 15%.

In the most recent quarter, not a single CFO rated the Fed's efforts to control inflation as "poor," and the percentage of those who described the central bank's policy as "good" increased from the previous quarter to 55%.

Despite the unexpected increase in long-term inflation expectations, the market responded positively to Tuesday's CPI reading and closed at a new record after a few days of selling. This bullishness aligns with the view of CFOs on the council regarding inflation.

Nearly 80% of CFOs in the Q1 survey believe that inflation will not reach the Fed's 2% target before 2025 at the earliest, and this view has been consistent across our surveying.

The market has received the Fed's message that March is not a possibility for the start of rate cuts, but CFOs remain cautious on the Fed. According to the Q1 survey, 44% of CFO respondents do not expect a rate cut until September. The CME FedWatch tool shows that a majority of traders still believe June is a likely target. In the Q1 CFO survey, equal groups of just under 25% of CFO respondents think the cuts will begin in June or July.

Although traders anticipated a slower-moving Federal Reserve than CFOs, the latest quarterly view shows an increase in dovish expectations. The survey's greatest swing in interest rate outlook comes from CFOs who previously expected rate cuts to begin no earlier than November 2024.

CFOs are not concerned about rate anxiety as a significant obstacle to stock growth in the short term. Over 80% of CFOs predict that the stock market will continue to rise towards the 40,000-point mark, with technology remaining the leading sector, rather than entering a bear market.

The quarterly CFO survey captures the perspectives of a limited number of chief financial officers from large corporations that make up the 100-member council, with 27 members responding in Q1.

In 2024, corporate cash is expected to increase due to some C-suite economic confidence. Despite regulatory headwinds and the antitrust stance of the Biden administration, there is evidence of more appetite for deal making. Nearly one-third of CFO respondents say strategic M&A will be the top capital spending priority this year, which was the most popular response among CFOs for 2024 capex planning.

The Q1 CFO survey reveals that despite the economy and market proving more resilient than anticipated, there are warning signs. The biggest risk cited by CFOs this quarter is a perennial one for major corporations - consumer demand, which consistently ranks as the No. 1 external risk to business and is currently at its highest level among risk factors in five quarters.