by Pierre G. Villere
As they say, “this too shall pass,” and when we come out on the other side of current Covid-19 and social unrest stresses on our society, there are some tectonic demographic changes coming over the next decade that will dramatically change our business, and the economy as a whole.
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The headlights are pointed uphill. After weeks and months of an economic shutdown, artificially imposed by the necessity to quarantine and therefore close virtually all business activity, the U.S. and global economies are slowly re-awakening. Countries all over the world are taking phased approaches to re-opening, with constant monitoring of Covid-19 outbreaks to avoid spikes or recurrences. And as I have written previously, my view today is very different than it was in early to mid-April; I think the damage has been far greater, and runs much deeper, than I expected back then. The impact of this multi-month shutdown will take a far longer period of time to recover from, although the construction industry recovery may outpace other sectors of the economy.
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My well-known optimism, even throughout the last Great Recession, has been shaken by the swift and sudden collapse of the global economy, including ours here in the U.S., in the face of the novel coronavirus also known as Covid-19. I am not any different than most consumers, except that I probably fall within the upper tier of those who see life through rose-colored glasses, and therefore espouse optimism at every turn.
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I hope you read my column last month; I worried about the events surrounding the unfolding coronavirus epidemic in Milan and northern Italy, and feared what might happen if it struck an American city. I described the epidemic as a Black Swan, a theory that refers to unexpected events of large magnitude and consequence and their dominant role in history. I had no idea we would witness what has occurred since I wrote that column.
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For months now, I have been extolling the virtues of the U.S. economy, as well as the larger global markets, and touting the slow-but-steady strength of U.S. business and industry, especially the strong construction markets that drive volume in our concrete businesses. And as I have written so many times before, my philosophy is that “sentiment is self-fulfilling.” So now we have the coronavirus, and some of the most recent reactions to it have left me disquieted, wondering if a “Black Swan Event” could upend the U.S. economy.
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This time last year, the business press was having a field day with their occasional Chicken Little prognostications that the economy was headed into recession, and the talking heads on the business news cable networks were the worst. Their bearish view, derived from the tiniest of economic indicators, threw the stock market into a tailspin the last couple of months of 2018, which continued into the first part of 2019, giving pause to the entire economy.
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I can’t help but follow up on my column from a couple of months ago when I opined that a strong stock market was a harbinger of the economy, and what lies ahead. Now that 2019 and the decade it capped have come to an end, it’s worth reviewing the markets and what they foreshadow. In addition, the many geopolitical pressures from various directions don’t even seem to be moving the needle on the economy in particular, and sentiment as a driver of the underlying economy in general. Let’s take a look at both.
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My late business partner Bill Allen was an institution in the ready mixed concrete industry, and I was fortunate to spend 15 years working beside him and learning from a master. Industry education was of utmost importance to Bill, and he felt that because of our firm’s success, we had an obligation to give back, constantly teaching our industry how to improve financial performance, operations and safety through education.
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As this column was going to press in early November, the U.S. stock markets were breaking records and reaching all-time highs. Many in the economics and investing community were holding their breaths as we tip-toed through third-quarter earnings season for America’s publicly traded companies, big and small. The high-level concern going into earnings season was that the slowing U.S. economy would unleash a spate of poor reports, and the stock market would confirm what many bears had predicted: the slowdown is here. Well, it didn’t happen.
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By: Pierre G. Villere
The top line economic indicators are mixed these days, but we remain bullish at our firm about the future of the construction industry. My frustration is with the press, from CNBC to the major news networks on both the conservative and liberal sides of the political spectrum, with their need to fill the day with news. This results in long, anguished speculation about the state of the economy, and just more of the Chicken Little Syndrome, as I call it (“The sky is falling! The sky is falling!”).
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