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.
November 2nd, 2009
Anticipation of recovery seems to be the talk of the town, or the beaches, this summer. As it applies to the investment management industry, recovery might refer to the economy, the markets, or the industry itself. There are clear signs that we may have seen the worst for all of these. But what next?? The debate rages whether the economic recovery will take the shape of a V, U, L, or double dip into a W. Will the markets continue to march on, or suffer a significant correction? Will business growth and profitability return to levels that existed prior to the downturn, or will managers continue to struggle for some time?
The fact of the matter is that nobody really knows. I find managers cautiously optimistic, hoping to return from vacations to recovery and expanding businesses, but not with a high degree of confidence. How should management respond to this environment? By staying nimble, investing in targeted ways, draining inefficiencies out of their organizations, stepping up communication with their employees and clients, and focusing on execution to drive results. Planning must be dynamic, thoughtful, and flexible. I am very hopeful that recovery is near, but my sense is that volatility will remain high, as it applies to the economy, markets and the industry, and management which stays very close to the marketplace to react to quick changes will prove more successful than their counterparts who don’t.
August 26th, 2009
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