CEO confidence is at a high: Global YPO survey
The U.S. economy appears to be on the cusp of a breakout from the sluggish pace recorded over the past few years. The YPO Global Pulse index of CEO sentiment, which aggregates the forecasts of thousands of business leaders on the front lines of the economy, revealed in its January 2014 poll of YPO members that business confidence in the United States surged to its highest level since April 2012.
As an active Young Presidents' Organization member and the CEO of Customers Bancorp, I have followed the YPO Global Pulse for years now, and this is not the first time I've seen the index indicate increased optimism early in the year, only to fade away as the year progresses. However, several signs support my belief that this year may be different and that the optimism we're seeing today will translate into accelerated growth in 2014.
Why such a high level of optimism now? I believe it's because CEOs have finally seen some sanity among the administration and members of Congress from both sides of the aisle. We have a compromise on the budget for the first time in the past several years. Budget deficits are heading in the right direction, and there is hope that both parties will do what is necessary to avoid another government shutdown. Problems with the Obamacare were recognized this past quarter, and rather than watching everybody attack each other, the country is more focused on resolving issues and monitoring where things might be heading. That—coupled with the benefits of all the refinancing by consumers and businesses over the past few years and easier credit availability—has resulted in a spending boost by consumers and businesses. The housing and equity markets reacted positively in 2013 and made access to capital easier, and people finally started feeling somewhat better and wealthier.
Will this optimism prevail?
—According to the YPO survey, this year we are seeing optimism throughout the world and in almost all sectors.
—The Fed has announced and started executing its policy of gradual tapering. Unlike in mid-2013, the reaction in emerging markets has been somewhat more tempered, even when taking the recent sell-off into account. Hence, chances of an emerging market currency meltdown are less today.
—Even though rates are somewhat higher, YPO members in the housing sector see a continuation of improvements in most markets. On a relative basis, rates are still very low.
—Equity markets should continue to do well in 2014. We should expect at least 7 percent to 10 percent growth. There appears to be no better place to put your money.
Risks to keep in mind
—Midterm election rhetoric has the potential to stall any progress made in Washington over the past few months.
—Global tensions could escalate further, fueling fear and pessimism. Hot spots that can affect our economic activities include the Middle East, Asia Pacific region and some Eastern European countries.
—Europe continues to remain in slow-growth mode.
At Customers Bank, we saw the fourth quarter of 2013 showing the fastest business-loan growth in years. Our pipeline is showing the same trend continuing into January. However, we have noticed a remarkable slowdown in consumer mortgage activity since late third quarter of last year. Let's hope that is just seasonal.
In my opinion, there is no question that the increased CEO confidence revealed through the YPO Global Pulse Index will result in a better economy in 2014.
—By Jay S. Sidhu, chairman and CEO of Customers Bancorp, Inc. and Customers Bank, with headquarters in Wyomissing, Pa.
CNBC and YPO (Young Presidents' Organization) have an exclusive editorial partnership. It consists of regional Chief Executive Networks in the Americas, EMEA and Asia-Pacific. These Chief Executives Networks are made up of a sample of YPO's unrivaled global network of 20,000 top executives from 120 countries who are on the front lines of the economy. The opinions of Chief Executive Network members are solely their own and do not reflect the opinions of YPO as a whole or CNBC.