Corporate America faces recession in 2022

As top executives from companies such as JPMorgan Chase Co, Walmart Inc and United Airlines paint a grim economic picture for the coming year, Reuters Corporate America is starting to feel the chill of a looming recession.

According to a survey by the Business Roundtable of top US CEOs, companies are planning to slow down hiring and capital investments for the next six months, as borrowing costs increase sharply.

The U.S. Federal Reserve's relentless war on inflation is roiling the economy and forcing companies to lower their earnings forecasts and rein in expenses, as it is at a multi-decade high.

JPMorgan CEO Jamie Dimon warned of a mild to hard recession next year as a slowing economy and runaway inflation hurt consumer spending, while Scott Kirby, his counterpart at United Airlines, has flagged plateauing demand for air travel, indicating pre-recessionary behavior, in their interviews with CNBC this week.

Arthur Hogan, chief market strategist at B. Riley Wealth said CEO commentary about the 2023 outlook was logical at this time, with so much uncertainty surrounding the Fed's battle against inflation.

Some of the largest American banks are already sounding alarm bells on the economy in their client notes, with a few predicting a slowdown, while others are signalling an outright recession.

A Reuters poll of economists showed that the U.S.'s economic growth is expected to slow to 0.3% in 2023 after a 1.9% rise this year. It also suggests a 60% chance of a U.S. recession next year.

Elon Musk, the CEO of Tesla Inc., said in October that the recession would last until the spring of 2024.

Walmart CEO Doug McMillon told CNBC that a downturn might be necessary to reduce inflation for his customers, who are more budget conscious.

A Wall Street Journal report stated that Pepsi is thinking of laying off hundreds of workers in headquarter positions, potentially joining a list of tech companies that are reducing headcount to rein in costs as they prepare for the uncertain outlook.

The S&P 500 firms could see their first decline in earnings in two years in the fourth quarter because of the signs of a recession, according to American companies and brokerages that cover them.

The profit growth at S&P 500 companies is expected to slow to 4.9% by the year 2023, after rising 5.8% in 2022, according to Refinitiv IBES data.

While forecasts for the size and timing of the recession vary, expectations for an economic recovery depend on the Fed's stance on rates.

Financial markets may react sooner and more violently than the economy itself, according to J.P. Morgan Chief Markets Strategist Marko Kolanovic, although there is significant uncertainty about the timing and severity of the downturn.

The S&P 500 is down about 17% in 2022, and barring major rallies in the three weeks until the new year, the benchmark index is poised for its worst year in four years.

Rick Meckler, a partner at Cherry Lane Investments, said that recent rallies have failed to gain traction because of cautious comments that are leading to investors being skeptical of a full rebound in markets.