Should we be preparing for another economic storm?
Main recession indicators are moving towards the possibility of a downturn.
Positive data points could be weaker than they appear.
Continue to invest but keep a short leash on your more speculative projects.
So, what are we watching closely to help with our strategic planning over the next 6-12 months? First, we are using our Recession Barometer, which has correctly predicted all five recessions dating back to 1978. This helps eliminate biases that arise from constant headline news and fluctuating data points. The Recession Barometer is currently showing continued economic growth; however, several data points are inching closer to signal economic contraction. Going forward, we are paying close attention to the consumer since it is the largest factor in our Recession Barometer. Any change in consumer confidence, spending, employment, or any slowdown in the consumer would cause us to become more concerned. The other thing that we are following closely is the yield curve due to its incredible accuracy in predicting the future.
Regardless, we want to be ready to react whether we are headed for further expansion, a midcycle slowdown, or economic contraction. Having plans in place for each scenario will let you grow your business in any economic environment.