Is the Recovery Real?
Is the economic recovery real? Last week we received a rather strong report on the economy for the third quarter. The question is: what caused it and will it continue? We know that government stimulus played a major role in the bounce in growth that we’ve seen. Nevertheless, this result is surely better than continued economic contraction. The issue becomes how the economy will perform in the inevitable absence of such extensive stimulus.
We are transitioning from a secular increase in leverage and debt to a secular reduction in such leverage. This transition will ultimately override shorter turn moves in the economy and markets. Such a transition does not occur in a few months or even a couple of years after the previous secular trend took place over a generation. It will dictate the “new normal” in the economy and markets which will be characterized by muted growth and uptrends, depressed profitability, and false starts.
In this environment, companies and their executives will need to differentiate their performance from their competitors in order to succeed. The best firms will excel. Many of the rest will struggle. Best practices across all functions will need to be adopted if firms are to grow and prosper.
Add comment November 2nd, 2009
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