• The economy will enter a recession in the second half of 2025, according to a majority of chief financial officers responding to the quarterly CNBC CFO Council Survey.
• CFOs describe themselves as generally "pessimistic" on the overall state of the U.S. economy and uncertain about the stock market.
• 95% of CFOs said policy is impacting their ability to make business decisions, and many said while Trump is delivering on promises, his administration's approach is too chaotic, disruptive and extreme for businesses to navigate effectively.

The stock market experienced a relief rally to start the week, as comments from the Trump economic team over the weekend suggested a softer stance on tariffs. But attempts to keep the comeback going fizzled out by Wednesday as Trump prepared to announce new auto industry tariffs. As it was within the boardroom, hope was not likely to replace caution any time soon.

Many executives in the C-suite and across the economy remain disturbed about the trade war outlook and a White House that has given every indication it is ideologically committed to a major change in global economic policy. Shifting messages from President Trump that continue to add confusion to the tariff planning process haven't helped.

In a word, the "pessimism" has crept back in where the animal spirits had been after Trump's election. That's one way to sum up the results from the latest CNBC CFO Council quarterly survey for Q1 2025. While some chief financial officers said Trump is doing what he promised on the campaign trail, many CFOs said the way he is going about delivering on his agenda is not what was expected. 

"Too chaotic for business to navigate effectively" was how one CFO respondent framed their view of Trump's second term to date. 
 
"Extreme"; "Disruptive"; "Aggressive"; "A wild ride," were some of the other ways CFOs portrayed their current view. 

It all adds up to a majority of CFOs (60%) saying they expect a recession in the second half of the year – another 15% say a recession will hit in 2026.

Just a quarter ago, when the recession question in the quarterly survey was laid on the Fed rather than Trump – in the Q4 2024 survey, we asked whether the central bank's efforts to tame inflation would lead to an economic slump – only 7% of CFOs said they thought that was on the calendar for 2025. 

In recent weeks, recession has become a more popular default setting in the market, for the first time since the Fed began aggressively raising interest rates to beat back runaway inflation in March 2022. The odds of recession are running as high as 50% at some financial firms, new "recession watch" indicators are being created, and other recent CNBC surveying, among money managers and economists, shows a spike in recession fears.

The CFO Council survey is a sampling of views from chief financial officers at large organizations across sectors of the U.S. economy, with 20 respondents included the Q1 survey conducted between March 10 and March 21.

U.S. trade policy is the primary reason for the new economic downturn base case. It is now being cited as the top external business risk by CFOs, at 30%, followed by the related risks: inflation (25%) and consumer demand (20%), with the latest reading on consumer confidence in income, business and job prospects hitting a 12-year low.  

Ninety percent of CFOs say tariffs will cause "resurgent inflation," and as CFOs worry more about prices, expectations for when the Fed can engineer it back down to 2% in keeping with its dual mandate keep getting pushed further out. Despite Fed Chair Jerome Powell himself holding out hopes that any tariffs inflation may be "transitory," half of CFOs now say that the 2% target inflation rate will not be achieved until either the second half of 2026 or 2027.  

Pressure on U.S. treasury bond yields is expected to remain, with 65% of CFOs saying the range will still be between 4% and 5% at the end of 2025 (50% of CFOs expect yields to stay within the lower end of this range, between 4% and 4.5%, where 10-year treasury are today).

As industries look to the White House for tariff exemption deals molded in their own self-interest, the general level of economic and market uncertainty among business executives across sectors was registered in one unusual way in the quarterly survey. Typically, when asked to name the stock market sector that will do the best over the next six months, CFOs choose tech, health care or energy. In the history of the survey, the responses to this question rarely deviate from those three sectors. This quarter, though, the majority CFO opinion on the sector with the best growth prospects was, "Don't know." 

Few CFOs think the bull market will quickly resume its march upwards, with 90% of respondents saying the Dow Jones Industrial Average will retest 40,000 before ever reaching 50,000, which indicates the potential for several thousand points more in the index lost.

In a more key, core way, the cautious corporate view was evident in the change quarter over quarter with respect to spending plans, with the number of CFOs who say their firm plans to increase capex this year declining from Q4. It was not a precipitous decline (roughly 10%), but it is trending in the wrong direction. The largest share of respondents expect spending to remain in line with the recent trend at their companies (45%), and even as it declines as a budget stance, there are still more who expect an increase (35%) in spending than a decrease (20%).  

Overall, 95% of CFOs said policy uncertainty is having an impact on their business decision-making. 

The most acute way that rising pessimism was registered in the survey was simply by asking CFOs what they think of the economy: 75% of respondents said they are "somewhat pessimistic about the overall state of the U.S. economy" right now. And that's despite 75% being optimistic about the state of their own industry.  

The good news if a recession is in the cards? Ninety percent of CFOs think it will either be moderate (50%) or mild (40%).  

But CFOs remain divided on where it is all leading, measuring a mix of diminished hopes and bleak confusion. 

"I feel the current administration is seeing how far they can push before anything breaks. I am hopefully after the first 100 days that things will moderate," said one CFO. 

But another CFO responding to the survey concluded, "Complete chaos, without an end game strategy."