CEOs Lose Confidence in the Economy | Options Trading Strategies

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CEOs Lose Confidence in the Economy

Trying to identify the bottom of the market right now is tricky and the debate will continue to rage until the bottom actually appears. However, based on some of the sentiment surveys we are seeing I doubt that time is soon. The CEO sentiment survey was released today and showed how low confidence has really dropped.

The CEO survey queries a group of senior execs from some of the largest corporations in the U.S. Three of the specific readings from the survey were particularly troubling. The overall confidence level was 16.5% which is off from 79.5% at the same time last year.

The CEOs reported that 45% of them expected sales to decline, 52% expected investment to decline and 60% expected workforce reductions over the next year. The number that expected to actually increase jobs was a measly 9%. Not only do CEOs think things are bad in the economy but they expect them to stay bad in the near term.

With the U.S. in a liquidity trap, the ability for the US government and the Federal Reserve to push the market back into productivity is severely limited. That means that right now what we need to see is an increase in confidence. We can't force corporations to expand against the will of their managers any more than we can force consumers to spend more money on their products so that shift in sentiment may take some time to accomplish.

Until the sentiment indicators start showing more confidence on both sides of the economic spectrum (consumers and managers) the bottom is not here yet. That is not necessarily bad news for investors. Being successful in the market is more a matter of adjusting to market conditions than it is trying to fight the bears. Trading with a strong trend has been a great strategy for a long time; it is just a matter of knowing what the trend is.

For some great ideas on investing in a bear market, check out some of these articles and series.

- Trading short ETFs
- Buying put options
- Trading credit option spreads