GROWTH. TRANSFER. LEGACY.
Message or share this on LinkedIn:
These are questions we have heard frequently from our clients over the last quarter. Owners and CEOs are wondering when will the economy enter another recession. Good questions given the geopolitical uncertainty caused by Brexit and trade tariff wars, as well as partisan politics whipsawing that led to the longest government shutdown and legislation stalemate.
So, when is the recession coming? Honestly, no one has that good a crystal ball. But we can share some findings on how best to anticipate a downturn. Many executives and investors look to equity markets to shed light on long-term economic trends. But history shows (McKinsey & Co. research) that equity markets have a poor track record in predicting downturns. Credit markets are the more effective indicator, as they have triggered most financial crises and downturns in recent history. Unlike equity markets, credit markets don’t always function well when economic conditions get tough, making them a better leading indicator of the economy’s future direction. It is the credit market’s operating model that is the major causal factor for economic downturns. Here are some of its characteristics:
As you can see from the credit market operating model, if conditions are in place, a crisis will evolve. It generally takes several years, but a downturn is inevitable. Your best bet is to look for the following signs that an economic crisis is developing:
Heightening your awareness of the workings of credit markets is one answer to the question, “how do we prepare?” Yet, as the saying goes, “Don’t let a good crisis go to waste.” What else should you and your leadership team be considering to be more competitive after a downturn. Being strategist, and not economist, we offer the following three behaviors that will help you weather, as well as take advantage of, the economic storm:
The best advice we can offer is to accept that a downturn will be in our future and take advantage of these good times to prepare your organization to be flexible, aware and resilient to successfully navigate new levels of uncertainty that a downturn will toss your way.
Do let us know what you think and share this blog as you see fit!
“Recession is opportunity in wolf’s clothing” - Robin Sharma – writer
“I think the most important factor in getting out of the recession actually is just the regenerative capacity of American capitalism.” - Warren Buffett
Dick Albu is the founder and president of Albu consulting LLC, a strategy management consulting firm focused on engaging and energizing leadership teams of middle market private and family businesses. With offices in Stamford, CT, the firm is dedicated to helping its clients formulate robust business strategies and follow through on execution of key strategic initiatives. Dick Albu can be reached at 203-321-2147 or RAlbu@albuconsulting.com. Rob Krist, Managing Director can be reached at RKrist@albuconsulting.com. Please visit Albu Consulting’s website for more information at www.albuconsulting.com.
Join our mailing list
Follow our LinkedIn Company Page Co
Join our LinkedIn Group