Director Confidence Index – December 2022

| Corporate Board Member

This Month's Findings

Strong demand and employment numbers hiding under massive layoffs and volatile markets encourage public company directors this month, especially as inflation eases, they say. Many add that the underlying strength of the economy is not given enough credit and although most are expecting a recession soon, just as many are now expecting recovery to begin before the end of 2023.

In October, when directors’ forecast for business conditions 12 months from now dropped below a 5/10 and into ‘weak’ territory on our scale, it was the lowest rating in Director Confidence Index history and matched by CEO forecasts in 2009. However, when polled this month, director forecasts rallied, gaining 12.7 percent and clawing back all October declines.

Directors now forecast business conditions in December 2023 to stand at a 5.61 out of 10, when asked to rate current and future business conditions in a flash poll conducted in partnership with the Diligent Institute between December 5-9 among 232 U.S. public company board members. This month’s jump is a welcome change from the majority of the year that was in decline—much like CEOs’ rating.

Directors’ rating of current business conditions also ticked up in December to 5.82 from 5.48, as measured on a 10-point scale where 1 is Poor and 10 is Excellent. This is the first uptick in directors’ rating of current business conditions since July.

And despite the gains across multiple measures this month, directors’ December forecast still tracks 13 percent below their forecast in January of this year and 12 percent below their forecast in December 2021. Directors share that their forecast is driven by a likely recession and more economic downturns domestically and globally, especially in the first half of 2023, along with poor political leadership and dwindling consumer spending power.

Tom Bell, independent director at Norfolk Southern in the industrials sector believes that conditions will deteriorate further due to “Inflation, labor cost and shortage, ineffective government at federal level, poor policy making and regulatory interference.”

Jeffery Yingling, co-founder and investment committee chair at Energy Capital Ventures, agrees with Bell that conditions will worsen. He explains, “There is an elevated risk of recession due to high energy prices and wage pressures, leading to high inflation.”

They make up two of the 44 percent of directors who believe that conditions will worsen over the coming year—down from 52 percent in October.

However, a higher proportion of directors are now forecasting improving conditions compared to October, up to 37 percent from 26 percent. This is highest proportion predicting improvement since January of this year.

“There is ongoing concern about elevated inflation but is balanced by apparently resilient labor markets. The key tipping point will be whether the Fed can keep rates high enough to ultimately bring down inflation without enabling too deep of a recession,” says Peter Bain, independent director at Virtus Investment Partners, to explain why he believes conditions will improve.

Many directors echo Bain’s comment about the underlying resilience of the economy as we head into 2023 and hope for a resolution to global conflicts such as Russia/Ukraine and the domestic tumult in China.

“China is beginning to deal with reality of their zero COVID policy (i.e., it is too disruptive and not sustainable long-term). I expect interest rates and inflation to level off, too. And, although cannot see clear off-ramp just yet, I’m expecting the Russia/Ukraine war to show positive signs of concluding without growing into a larger conflict,” says the director at a large medical device company.

A higher proportion of directors have also grown more optimistic when discussing demand. The same proportion (47 percent) as last month say that consumer demand is up today from the beginning of the year. The proportion forecasting demand to be up one year from now climbed from 32 percent in October to 41 percent this month.


The Year Ahead

Directors’ forecasts for what will come in the year ahead have all improved since our last polling. A majority of directors now forecast that profits will increase in the coming year, up 12 percent since October to 55 percent. Similarly, 60 percent of directors expect revenues to climb, an increase of 3.2 percent since October.

The proportion of directors forecasting increases in capital expenditures has reached its highest level since April of this year—at 36 percent.

Directors Predict Mild Recession And Higher Rates In 2023

Almost a majority of directors (48 percent) expect the Dow Jones Industrial Average to end 2023 within the 30,000 to 35,000 range—not too far below its level today—but many also predict the benchmark could rise. Over one third of respondents expect the Dow to end next year above current levels, while only 16 percent expect the market to decline further.

“There’s a declining stock market conditions and lack of capital for trading,” says Gust Kepler, chairman at Blackbox Stocks, an analytics company for stocks and options traders. “The declining market conditions coupled with inflation and lowered discretionary consumer spending has greatly impacted growth and stability.”

Inflation & The Economy

The economy hit many unfortunate records in 2022 and business leaders and consumers alike are keeping a close eye on where inflation and interest rates will go in the coming year. Both measures are indicators of the overall health of the economy and business environment and are a main driver of directors’, CEOs’ and CFOs’ outlooks in our confidence index series.

According to our recent polling, 72 percent of directors expect inflation to gradually subside over the coming 12 months, after hitting a historic peak the previous 12 months. An additional 20 percent expect inflation to remain where it is now, and a doubtful 6 percent expect it to get worse. Only 1 percent expect inflation to decline rapidly, and no directors we polled expect it to get much worse.

“Inflation is impacting consumer buying – but the softening has so far been less than some had feared. I have a feeling that inflation will moderate,” says the director of a mid-size consumer manufacturing and industrials company.

“Inflation will likely subside, and supply chain issues will generally get worked out,” says Scott Pancoast, CEO, Founder and Board Member at Zylo Therapeutics, a pharmaceutical research company.

“High inflation takes time to tame. Our government has to first recognize we have a high inflation level and then take steps to modify its behavior that feeds inflation.  There is still an underlying strength in our economy, and it needs fine tuning to continue to improve,” says the independent director at a small, diversified manufacturing corporation.

When asked about the trajectory of interest rates, two out of three directors say the Fed Funds/Prime rate will end 2023 between 4.5% and 5.5%, up from 3.83 percent in December 2022. Only 2 percent of directors expect the rate to drop by the end of next year, but 14 percent expect that it could climb above 5.5%.

“I have concerns over recession in early 2023 and continued interest rate hikes by the Fed,” says Gary LeDonne, independent director at MVB Financial.

“There is ongoing concern about elevated inflation, balanced by apparently resilient labor markets. The key tipping point will be whether the Fed can keep rates high enough to ultimately bring down inflation without enabling too deep of a recession,” says Peter Bain, independent director at Virtus Investment Partners.

Only one third and 40 percent, respectively, predicted even hints of a recession when we polled CEOs and CFOs on their predictions about 2022 in December of the previous year. This year however, 81 percent of directors we polled expect to spend—at least part of the year—in a recession. Luckily, the vast majority of those who foresee a recession foresee only a mild or short-lived recession.

“We are expecting inflation to fall (good) but there will be some offsetting recessionary forces that may impede demand/growth (bad),” says the director at a large consumer staples company.

“Expectation of continuing increase in interest rates leading to domestic recession, a likely recession in existence already and economic downturns in China,” says the director of a large financials company.

Many other board members in financials agree, stating that they expect a mild recession in 2023.


Ongoing unrest in China is bringing attention back to their zero-Covid policy and Xi Jinping’s stronghold on the government of the powerhouse nation. As Covid spikes and their economy dips many wonder if it’s possible for the nation’s leadership to change. That’s something we can’t answer for sure—but we can say that 97 percent of U.S. corporate directors believe it is unlikely. Only 3 percent of directors think that Xi will either hold a title other than president or be ousted by this time next year.

We also asked directors to share their forecast for where the Russia/Ukraine war would be in December, 2023. Some 63 percent of directors forecast a continued slog, meaning that fighting will continue, and Russia will hold on to territory. Almost a quarter of directors (24 percent) predict a brokered halt, such as a cease-fire or negotiated peace agreement. Only 1 percent of directors say that the use of nuclear weapons could come into play.

“Although cannot see clear off-ramp just yet, I’m expecting the Russia/Ukraine war to show positive signs of concluding without growing into a larger conflict,” says the director of a large medical equipment manufacturer.

“I believe Putin will sustain war efforts in Ukraine, which will continue global supply chain disruptions that hurt the world economy, including the U.S.,” says the director at a small financials company.

The Race for President

Finally, we wanted to get an early look at your take on the upcoming presidential election, and we found 60 percent of directors in our poll thought Ron DeSantis will have the best odds of most likely next U.S. president as of December 2023—at least according to bookmakers. Another 26 percent think it will be Joe Biden.

Only one percent of directors believe that Mike Pence or Donald Trump will have the best odds of becoming president at this time next year.

“Trump will fade given all of his legal challenges, warranted or not,” says the director at a midsize company in the consumer discretionary sector. “The Republicans will have a large field.”

For those keeping score, UK betting platform Ladbrokes most recently listed odds of DeSantis at 21-10 or a 32.3 percent probability of being the next president, followed by Biden at 3-1 or 25 percent probability. Trump was third, at 11-2 odds or 15.4 percent. Pence was a longshot to even get the GOP nomination, with 20-1 odds for getting his party’s nod, about the same as Virginia’s governor, Glenn Youngkin.


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