A majority of global CEOs see a recession hitting in the next year, with nearly two-thirds anticipating it will slash earnings up to 10%, KPMG says

• 86% of CEOs running the world's largest companies foresee a recession in the next 12 months, according to the KPMG 2022 CEO Outlook.
• 71% of respondents project a recession will reduce company earnings by up to 10% over the next year.

CEOs worldwide are bracing for a contraction in economic activity and expect to take a related hit in profitability, but their confidence about growth over a longer-term horizon is improving, according to a survey released by KPMG on Tuesday.

Fears that rate hikes from inflation-fighting global central banks will lead to a recession have rocked equity markets worldwide this year. The US stock market has sunk into a bear market, and the MSCI ACWI Index, which tracks large- and mid-cap stocks in a mix of developed and emerging markets, has tumbled by 25%.

According to KPMG's 2022 CEO Outlook, 86% of CEOs running the world's largest companies also foresee a recession arriving, with a contraction to occur over the next 12 months.

The business consultancy surveyed 1,325 corporate chiefs in 11 key markets including the US, Germany, and China. All the respondents oversee companies with annual revenue of more than $500 million and a third of the companies take in more than $10 billion in annual revenue.

Meanwhile, 71% of respondents projected a recession will reduce company earnings by up to 10% over the next year.

Analysts covering S&P 500 companies have been cutting their third-quarter earnings expectations. The index's estimated earnings growth rate for the period was 2.9%, according to an update from FactSet last week. If that rate is realized, it would be the lowest pace of earnings expansion since the third quarter of 2020, as the COVID-19 crisis continued to lash the global economy.

The survey, which asked CEOs about business strategies, found that 39% have already implemented a hiring freeze as a recession looms, and 46% are considering downsizing their ranks over the next six months.

"But when CEOs take a longer-term view, 79 percent expect their organization's headcount to increase over the next 3 years, and CEOs are still investing in their existing workforce, with half currently focused on boosting productivity," said KPMG in the outlook.

The survey also found that 58% of business leaders foresee a "mild and short" recession.

"In fact, when asked about their confidence in the resiliency of the global economy over the next 6 months — a period likely to be fraught with uncertainty and constant change — 73 percent still had a positive outlook, up 13 percentage points from February 2022," KPMG said.

The S&P 500 has lost 21% this year, but its yearly loss was narrowing with stocks on Tuesday entering a second straight rally as fourth-quarter trading gets underway.