MarketSpeak

It has been one year since this blog accurately predicted and announced that the crisis in Finance was over. So what has happened since then?

As recovery slowly made its way through the rest of the economic system, it has done so with the help of government intervention, as would be expected in such a meltdown. Yet, some could say that this recovery may have been stalled due to political wrangling for the sake of wrangling. A protracted debate on healthcare in the US, the stalemate in how to discipline Wall Street have stalled economic progress in fueling green technology and Main Street.

Nonetheless, this focus was re-established a couple of months ago when President Obama’s attention was taken away from Healthcare long enough to pronounce a few words to Wall Street regarding the fate of Main Street and that money needed to flow downstream as quickly as possible. In addition, the federal government provided incentives to businesses to hire the unemployed. Add to this some positive results from Big Business and continuing signs of stability in Finance and it is no surprise that, in the past few weeks, we have heard major companies are starting to hire again, like Cisco. In addition, Daimler divested itself from what can be seen as a hedging position by moving away from Tata Motors, an investment it made after walking away from Chrysler. To yet further support the argument that the beginning of corporate recovery is currently in effect, some growth moves are being seen in corporate acquisitions and market penetration activities with new product announcements, rock-bottom pricing in the restaurant industry and positive growth indicators in consumption.

As for financial market indicators, commodities have edged lower due to a strengthening dollar. More specifically gold seems to be peaking, for now.

From all this, I am concluding that we have entered a second recovery phase. If recovery of financial markets was the first phase, then a beginning recovery of Big Business is the second phase. Analysts were not too far off in guesstimating that this would occur 12 to 18 months after recovery of the financial markets.

So, if all this is true, we should see a slow and steady decrease in unemployment, an increase in retail sales, and hopefully a reduction in personal debt (yeah, right) over the next 12 to 18 months.

Furthermore, if this assessment is correct and people are getting hired through the spring quarter, results from these new hires will be expected by autumn. So, this can be a brisk summer for travel, a tense but exciting time for families, and should be a precursor to a marketing-heavy fall. Maybe tradeshow activity will pick up, depending on budgets. Maybe teleconferencing activity will pick up if budgets are tight or if new customer relationship management policies come into effect.

My only question involves the other side of this scenario. Although marketing will pick up on the part of companies who hired during the spring, who will they market to? Where is the money? My guess is that financing will be offered at a reasonable rate to businesses with decent credit scores and this could fuel corporate purchasing in companies seeking to grow their customer bases and who have a clear plan to do so.

So, as a market observer, I would look for clean balance sheets, income statements with near-industry standard ratios, given the current economy, and companies with clear marketing plans focused on reasonable growth in key market areas. The clean balance sheets will ease borrowing. A clear marketing plan ensures money will go where needed with measurable results.

As a result, this is an opportune time for capable companies to get one-up on their snoozing, battle-weary competitors. This, in my opinion, is what the turnaround will look like at the microeconomic level. All the indicators point to now as the turning point on Main Street with an execution timeframe of 6 to 10 months at which point initial results will be measured and more marketing and investments tweaks will be made.

We’re not out of the woods yet, as the expression goes, but we’re headed in the right direction with yet another milestone passed.