Some consumer demand fears have caused a decline in confidence among top corporate CFOs regarding the economy.

• The latest quarterly survey of the CNBC CFO Council revealed a surge in concerns about consumer demand.
• While at least one rate cut from the Fed is expected, a significant number of CFOs predict that the first rate cut won't occur until 2025, and inflation will persist until 2026.
• Nearly 60% of surveyed CFOs expect Donald Trump to win in the November election, with high prices and interest rates being the biggest issues leading up to it.

The second quarter is expected to be the most challenging quarter for Walmart this year, according to the retailer's CFO. This sentiment is shared among other CFOs who are concerned about the current state of the economy and uncertain about the future. A recent survey by CNBC found that fears among top corporate CFOs about shaky consumer demand have increased by six quarters, with over half of CFOs citing it as the biggest external risk to their business.

The percentage of CFOs who identified consumer demand as the greatest risk has increased from 18% to 54% in recent quarters, with fast-food chains introducing value menus and car dealers facing challenges in selling inventory.

During a recent call of CFO Council members, a financial services CFO disclosed data revealing that while consumers are still traveling and eating out, the transaction values for these activities have decreased. "They're not cutting back entirely, but they're definitely finding more cost-effective ways to achieve their objectives," the CFO stated. Meanwhile, food sector CFOs on the call emphasized the importance of value, with one specifically referring to the concept of a "value war."

The Q2 CFO Council survey, conducted from June 3 to June 20, included 24 respondents and represented a sampling of views from chief finance officers across the market and sectors.

Despite their knowledge of Federal Reserve policy history and the impact of higher rates on past economies, the CFO group has not significantly changed their view of the Fed and the interest rate environment. In fact, the percentage of CFOs who rate the job the Fed is doing as "good" has reached its highest level ever at 70%. However, there were a few notable moves in other survey numbers related to monetary policy and the rate outlook.

Nearly 92% of CFOs now expect the 10-year yield to remain above 4% through Dec. 31, a significant shift from the previous quarter when almost half forecast a dip below 4%.

CFOs surveyed have pushed out their inflation view even further, with 42% saying inflation will not reach the Fed's target of 2% until 2026, significantly higher than any other response.

Despite the Fed's recent statement that it is not ready to start cutting rates, 38% of CFOs still expect a rate cut in September, while 29% believe no cut will occur in 2024. However, between forecasts for a cut in September, November, or December, one cut before the end of the year remains the majority position, consistent with the Fed's own view. At the Fed's recent FOMC meeting, Chair Jerome Powell noted that while inflation is still running too high, the pace of price increases has come down "significantly."

Despite a decline in confidence, one-third of CFOs still believe in a soft landing for the economy. This is down from 48% who felt optimistic about the scenario last quarter, but it's still twice the level of confidence compared to the year-ago survey. About half of CFOs (54%) believe the economy is either in a recession or will enter one between the second half of this year and the second half of 2025. Additionally, more CFOs are now inclined to forecast a pullback in the stock market, with just under 60% saying it's more likely to fall back to 35,000 rather than reach 45,000 for the first time.

CFOs have identified interest rates and inflation as the most pressing issues for them in the lead-up to the election, despite other political issues dominating the news, such as immigration, tariffs, and tax policy. While it is early, 58% of CFOs believe that Donald Trump will be elected president, while only 12% think Joe Biden will win. The remaining respondents were uncertain about the outcome.