Thought Leadership
Strategizing for a Recession-Resilient Business
When I say there’s a 100% chance of a recession, I’m not saying there’s 100% chance tomorrow or even a year from now, but there’s going to be a recession. Everyone focuses on guessing when it will be versus acknowledging that there will be one at some point in the future. But here’s what’s obvious: we have an economic cycle and that means we have booms, and we have recessions.
I think if people take the perspective of building a sustainable business that can survive a recession, they would be much less focused on whether that’s going to happen this month, next month, next quarter, the beginning of next year or two years from now. But we’re in a world where a lot of people get paid to give opinions and have to come up with supporting details.
Right now, we’ve got a mixed bag of data, some of which indicates we’re about to fall off a cliff. We have political turmoil in the U.S., wars going on in Europe and the Middle East, the UAW strike and rising auto loan delinquencies. We’re about to have about a couple of billion dollars sucked out of the economy when people start to pay their student loans for the first time in three years.
All of this adds up, but it’s against the backdrop of companies never having had more cash on their balance sheet and households having lowered the cost of their mortgages and put away a ton of money. We’ve also got positive employment reports and indications that the economy is still expanding.
While some problems appear to be growing in magnitude, I don’t think they’re yet at the point that they outweigh the strong parts of the economy. Still, at some point in the future we’ll have negative GDP for a couple of quarters and that will qualify as a recession.
It seems very rational and normal to me that some of these negative things are starting to grow in importance or in size, which eventually will be self-fulfilling, and we’ll have a contraction. The negatives will get to the point that they overpower the positives, and we’ll end up with a recession.
Frankly, I think it would be very healthy because we have had so much expansion and inflation.
It’s what you need in order to have a sustainable economy. You have to give back some of the excesses that grew during the expansion periods, just like you need balance in all aspects of your personal life. The economy needs balance too.