Navigating Indecision: Strategies for Moving Forward
We are at the precipice of a change from high inflation and interest rates (at the end of the bullwhip effect coming from COVID-19 investments from governments to prevent a major global recession). The U.S. is leading the world in trying to overcome this precipice. It is taking longer than anyone wants, causing a loss in consumer sentiment.
Some observations:
- The Baltic Dry Index has recently been increasing [Baltic Exchange Dry Index – Price – Chart – Historical Data – News (tradingeconomics.com)]. This may be due to the continued reorientation of the available shipping containers, not necessarily caused by an increase in demand but the redirection of freight from China to other new sources outside of China as the US seeks alternative supply for new products and services, as well as the impact of middle east wars and trade route adjustments.
- Producers Pricing Index and CPI are crisscrossing and trying to stabilize around the world. The crisscrossing and stabilization of these indices globally reflect efforts to manage inflation.
- The GEP volatility index shows excess inventory, likely influenced by various factors such as disruptions in shipping routes and production slowdowns.
These leading indicators and associated freight indexes generally provide a decent signal of what is to come. These insights also should be considered:
- The geopolitical crisis occurring in the Middle East and the consequently restricted movement of cargo through these sea lanes.
- On top of all of this, with high interest rates, VCs have moved to investing in safer investments (5%-10%) versus investing in companies that require high-interest loans for the VC-invested companies. This has resulted in a reduced number of M&A investments until interest rates subside.
- Furthermore, with a record number of elections this year, investors and business owners are delaying decisions to invest until the new government is “in-charge”.
- Meanwhile, in the US, the GDP growth rate has been cut in half, although still growing, causing company’s multiples to come down and, therefore, their valuations have decreased.
- Additional localized leading indicators to track are unemployment, investment trends in technology, environmental & climate investments and global trade changes.
When you add it all up, we are in a year of stagnation and indecision –
“should I stay or should I go”.
Our last webinar (Financial Investment of Automating & System Integration (ERP/WMS/IoT/Digital Twin) into Your Production-Warehouse Facilities) covered this topic and will be covered in upcoming Webinars:
- Webinar 2 (May 30): Strategic Risk Simulation: Reshoring from China – Investigating Changes in Trade Routes
- Webinar 5 (June 6): Creating Company Growth by Leveraging the Risk Landscape
