Hunker Down or Move Ahead?August 17, 2011
With the volatility in the stock market last week, many of us are wondering what’s next. I’ve been writing about the increase in jobs in the economy and the venture capital boom as fundamentals pointing toward a slow but steady climb out of the recession. What should we do then with the downgrade of our U.S. credit rating and wild stock market activity last week? Should we hunker down and stop spending altogether or continue to move forward making business decisions as wisely as we can?
Have The Fundamentals Changed?
Warren Buffet and others don’t seem to think so. He told Bloomberg Television that the U.S. should have a “Quadruple A” rating. Other advisors are saying that the S&P downgrade won’t have an impact on investment decisions in money and bond funds. The fundamentals of the U.S. economy remain intact and opportunities are presenting themselves. Gene Marcial in the attached Forbes article points to many senior advisors who are are telling investors to “take advantage of the ignored and hidden opportunities in this uncertain market environment.” Goldman Sachs strategist David J. Kostin says, “Strategically, we believe the S&P 500 is attractively valued at current levels and offers 20% prospective return to our year-end 2011 target of 1,400.”
Employment Continues To Rise
Last week’s good news in the labor market was eclipsed by the S&P downgrade and ensuing stock market volatility; however the numbers were positive. The ADP National Employment Report for July showed increasing employment as the country added 114,000 jobs, even amidst government lay offs. The increase is modest but there is continued movement in the right direction with small and medium businesses leading the way. Gary C. Butler, Chief Executive Officer of ADP, commented that although construction jobs were down, “the professional business services, education and healthcare sectors had good growth. Another bright note is that small businesses showed positive job growth for the 20th straight month, averaging 69,000 jobs a month for the past year.”
While this is a blog focused mainly on commercial real estate resources, it seems appropriate in light of the stock market impact on business confidence to highlight companies that are weathering this storm. Warren Buffett’s Berkshire Hathaway’s earnings were up 74% in the second quarter from the prior year. He is bullish on this market. Forbes is recommending five others across several sectors whose fundamentals are intact: ExxonMobil, Occidental Petroleum, BlackRock investments, CSX transportation and Eaton industrial. In each case the dividend yields for these companies are in the 3% range and their earnings are rising.
Does This Impact Your Real Estate Decisions?
While stock market investments won’t directly impact your lease rate or terms, the stability in the overall market and confidence you have in the economy as a whole will impact your view on these decisions. As you consider growth projections for your company, keep your eye on the fundamentals in the economy, make measured and wise decisions using trusted advisors in areas outside of your core competencies so you can clear the hurdles in front of you and finish the race well.
Complete Forbes Article: Some Seasoned Pros See The Calm After The Market 08-15-2011
Complete Bloomberg Article: Buffett: U.S. Downgrade A Mistake 08-06-2011