Trader Talk

CFOs most optimistic in 10 years on Trump victory

Strategists and analysts are having a devil of a time figuring out what—if any—impact the Trump victory will have on corporate earnings in 2017, but CFOs seem to think it's mostly good news.

Out today is the Duke University /CFO Global Business Outlook Optimism Index, a quarterly survey, which jumped to its highest level in more than a decade.The proportion of U.S. CFOs who are optimistic outweighs those who are pessimistic by four to one. Roughly 330 U.S. CFOs took part in the survey, and another roughly 600 took part outside the U.S.

There's good reason for that: the CFOs list regulatory requirements and corporation taxation as among their biggest issues. Those are the issues the market expects Trump to address.

Here's what's interesting: while CFOs are more optimistic on the overall economy, they are not quite as optimistic about their own companies prospects.

The reason?

"CFOs believe the business environment will improve, but they don't know exactly how their company might be able to navigate the new terrain," said John Graham, finance professor at Duke's Fuqua School of Business and director of the survey.

Still, Trump's election is having some impact on CFO thinking. When asked how many have changed their plans since the election, 12 percent of firms said they now planned to do more hiring because of the election, and 13 percent said they planned to spend more as a result of the election.

That's a significant increase, even if more than half said it was too early to tell.

But CFOs had been getting a bit more bullish in general, even prior to the election. Here's the results when asked whether CEOs were planning to hire more in 2017 in general:

CFOs: Hiring in 2017

More hiring: 58%

Less hiring: 15%

No change: 27%

And more than half the CEOs said they were planning to increase their spending in 2017:

CFOs: Spending plans in 2017

Increase spending: 52%

Decrease spending: 17%

No change: 31%

Whether it is a gradually improving economy, or the Trump election, or some combination of the two, Graham sees CFO sentiment changing.

"In the past they tended to say the global situation was not that great, but they had a plan to navigate the environment. Now it's the opposite. They're clearly more optimistic in general, but not entirely sure what the bottom line will be for their own companies yet."

And the Trump effect keeps rolling along!