Executive Outlook 2013: Bring On More Certainty To Unleash Investing Power

Answering the question of “what’s holding up our long-awaited economic recovery” could be a sensitive subject. Thoughts of the logjam in Washington, budget sequestration along with fiscal and monetary policy all come to mind. In the interest of full disclosure, I’ll try to stay away from these topics.

Instead, we can focus on known information. Home prices appear to be on the rise, businesses, for the most part, continue to see growth leading to higher stock prices and consumer confidence is trending to the positive. Unfortunately, it doesn’t seem like the positive data and trends are leading to the level of growth we might expect exiting such a significant recessionary period. Are higher home prices leading to more construction? Are higher stock prices leading to more investment? Is higher consumer confidence leading to higher spending? In the eyes of many, the resounding answer is “not to the extent that we expected.”

I’m a believer in certainty and confidence. There are so many uncertainties in today’s economy that it’s very difficult to build long-term confidence in the global economic recovery. Employment growth, consumer and government debt, slowing growth in China, ever-increasing regulation and lingering recession in Europe all contribute to the worry. Hardly a week goes by that some leading indicator doesn’t hit the wire and cause an emotional adjustment to financial markets. The fact is, information is more readily available today than ever before, and it provides the average consumer and investor countless opportunities to modify behavior based on the “latest word.” These are not the conditions that contribute to high confidence or certainty.

What can we do? We can start by looking at the glass as half-full. Many of us have difficulty doing this—some days, we seem to argue whether there’s even a glass there! From a business perspective, there is no question that companies are taking an extremely cautious approach to the recovery. How much cash is available on corporate balance sheets? Think of it this way: Some of the largest (and most profitable) companies in the U.S. are more comfortable with their cash “under the mattress” than spending it on capital, research and development or acquisitions. While some have correctly noted that there are benefits to keeping cash on hand, how much is enough? In my mind it begs the question, “How can we provide enough economic certainty so businesses feel more comfortable investing?” 

My view: We can all work together on building confidence that the economy is improving. To start, we can focus more on identifying and analyzing “trends” instead of reacting to each and every “data point”—trends are what help us determine where we’re at in the business cycle. While I personally think we’re in the early stages of a more robust recovery, we must also realize that there are many external factors that can dampen the mood. Let’s hope those that influence the components of certainty rise to the challenge, for it is “certainty” that will unleash the investing power of businesses and help drive the economy forward.MT

More Executive Outlooks: