The Military
Militarily, the south did not need to win the war by invading and defeating the north. Their belief was that they just had to hold on to what they had, hence their largely defensive strategy. Despite a marked numerical inferiority, the south believed (correctly, at least in the early stages) it had better leaders and better soldiers.
Davis boasted that Southerners were “a military people . . . We are
not less military because we have had no great standing armies. But
perhaps we are the only people in the world where gentlemen go to a
military academy who do not intend to follow the profession of arms.” This gave the South an unusually large percentage of its male population with basic military skills and training.
Source: Donald Stoker, The Grand Design Strategy and the US Civil War
At the same time, newspaper editorials such as this one from Southern Banner in Athens, Georgia (May 8, 1861) provided a steady flow of propaganda to boost southerners' sense of military and moral superiority:
The soldiers being raised for our subjugation, with a few exceptions,
are composed of the lowest class of "roughs," thieves, pickpockets,
&c.
Confidence was not lacking at the outset of the war, but not everyone was blind to what would be needed. For example,in Texas, West Point graduate Colonel R. T. P. Allen
observed the actions of the first Texans to volunteer for Dixie’s
cause. They believed in neither discipline nor drill and had no real
knowledge of warfare. They thought valor and devotion would win the
war. Allen knew better.
Source: Kenneth W. Howell (ed), The Seventh Star of the Confederacy: Texas during the Civil War
Consider also, as at least some military figures in the south must have done, that
It was an accepted military axiom of the nineteenth century — a lesson
ascertained in part from the American War of Independence — that when
a large, organized body of people was determined to break away from a
state, there was little that could be done to prevent it.
Source: Sexton
This was clearly expressed, for example, in the Georgia Telegraph (Nov 15, 1861). Even after it became evident early in the war that, among other things, the South was severely disadvantaged at sea and that the Union’s
heavy armaments may prove too much for our feebler ordnance and scanty
munitions
the belief was that the Confederacy would prevail. Referring to the American War of Independence, the article argued that Great Britain
...marched her troops from Massachusetts to Georgia – she penetrated our
whole interior with her legions, and yet failed to subjugate America.
What folly, then, is the talk of subjugation by an enemy able only to
penetrate here and there the mere outer cuticle of this great
Confederacy.
Right must prevail
Combined with this was a deeply held belief by many that the Confederate cause was right and must thus prevail, as typified by this April 13, 1861 item in the Wilmington Daily Herald of North Carolina
For well we are assured, that the southern spirit can never be humbled
- never subdued - never conquered while present existing southern principle maintains its identity...
Source: Rare & Early Newspapers
Religious figures played an important part too, with God on the side of the south. Even the spirit of Thermopylae was invoked:
Let our spirit be loftier than that of the pagan Greek, and we can
succeed in making every pass a Thermopylæ, every strait a Salamis, and
every plain a Marathon. We can conquer, and we must....under God, we
shall not fail. If we are true to Him, and true to ourselves, a
glorious future is before us. We occupy a sublime position. The eyes
of the world are upon us; we are a spectacle to God, to angels, and to
men.
Source: Rev. J. H. Thornwell, Our Danger and Our Duty (1862)
Economics, diplomacy and foreign recognition
Allied with the above was their belief in
the power of “King Cotton” and its allure to the European powers.
Davis and his advisors regarded the fiber’s pull as so strong that
they could almost assume British and French recognition.
Source: Stoker
The term 'King Cotton' appears to have first been used in David Christy's Cotton is king. Published in 1855, this book proved to be very influential in promoting the belief that the south had the economic power to get its way. By 1860,
it appears that the South was responsible for two thirds of the entire
world exports of cotton
Diplomacy and economic pressure were to play decisive roles in the southern strategy:
The chance that the Confederacy had, leaders in Richmond believed,
rested in the power of cotton to compel European statesmen and financiers to side with their cause. The key commodity of the
nineteenth-century Atlantic economy, Southern cotton fueled the
textile industries of Europe and sustained an estimated twenty percent
of the British population. With this trump card in their hand,
Confederate leaders were convinced that they could dictate Civil War
diplomacy. Cotton, Southern statesmen held, could be a bargaining chip
employed to induce British recognition of the Confederacy. With this
accomplished, the commodity could reassume its traditional role as a
source of foreign exchange that would provide the Confederacy with the
credit needed to obtain war supplies abroad.
Source: Jay Sexton, Debtor Diplomacy: Finance and American Foreign Relations in the Civil War Era 1837–1873

"This cartoon was created just before the start of the Civil War, but it demonstrates the Confederate states’ economic ideology. The south believed that Great Britain and France would bow down to them because those nations would need cotton for their industry, and therefore would turn their backs on the north for fear of hurting their own economies". Source: Dartmouth College Library
The south had great confidence in its economy, in part because of “decades of expanding production”. More recently, the Panic of 1857 had meant
the South, profiting from the steady exportation of the staple,
largely escaped the financial crisis that enveloped the North.
Southerners saw their avoidance of the panic as a triumph of an
economy that was based on agriculture and trade rather than on finance
and speculation. As DeBow’s Review, the voice of the commercial South,
declared in 1857, ‘‘the wealth of the South is permanent and real,
that of the North fugitive and fictitious.’’
Source: Sexton
Confederate President Jefferson Davis believed that once recognition had been achieved,
economic and military support would follow, thus guaranteeing
Confederate independence. Moreover, Davis believed that British
recognition alone would discourage the North from prosecuting the war,
and that the Union would withdraw from the fight from a fear of
British intervention.
Source: Stoker
The southern strategy was at times not without realistic hope for
The Palmerston cabinet twice considered intervening in the Civil War,
most likely by joining France in extending an offer of mediation to
the warring sides. Though not an outright recognition of the
Confederacy’s independence, mediation was a policy favorable to the
South as it would seek peace—which, given the success of Confederate
armies at the time, would almost certainly result in the separation of
the North and South.
Source: Sexton
No less a statesman than William Gladstone, in a speech in October 1862, went so far as to say:
There is no doubt that Jefferson Davis and other leaders of the South
have made an army; they are making, it appears, a navy; and they have
made what is more than either—they have made a nation.
Source: Sexton
Ultimately, though, southern hopes were sunk by, among other things (especially the way the south mishandled its cotton), the British middle and working classes’ intense dislike of slavery, and the Emancipation proclamation (1st Jan 1863) was perhaps the final nail in the coffin of southern hopes for British and French intervention.
A final point...
Not all southerners necessarily thought they would end up on the winning side. Many fought simply for what they thought was right without assuming that they would win. For example, one Confederate soldier's reason for enlisting was:
If we are conquered we will be driven penniless and dishonored from
the land of our birth.... As I have often said I had rather fall in
this cause than to live to see my country dismantled of its glory and
independence—for of its honor it cannot be deprived.
Sam Houston in Texas was perhaps the most notable southerner who felt the south could not win:
He said that the Union Navy would blockade the southern coasts and
starve Dixie’s people. The Union would take New Orleans and then split
the Confederacy in a related move by taking complete control of the
Mississippi River. Cotton would not be king, he said, because the
masses in Europe remained most prejudiced against slavery....
...But secessionists would not listen to such sober analysis. Instead, on
the day of the referendum, February 23, 1861, an overwhelming majority
of 46,153 voters favored secession while only 13,020 opposed.
Source: Howell (ed)
Other source:
- Susan-Mary Grant & Brian Holden Reid (eds), Themes of the American Civil War (revised edition)