While there does not appear to be single market force poised to strike in the near future equivalent to the mortgage crisis that precipitated the Great Recession, we are seeing various events that threaten to converge and create a perfect storm that could precipitate an economic downturn.
Geopolitical conflicts currently dominate news headlines—threats of reciprocal tariffs and trade wars involving the U.S., China, and other countries; fragile North American Free Trade Agreement (NAFTA) negotiations among the U.S., Canada, and Mexico; the impact of Brexit; conflicts with North Korea; and the threat of a new world war arising from lingering tensions in Syria.
On the financial front, rising interest rates threaten to curtail the continued availability of the “cheap money” that has helped fuel economic growth. The flattening of the bond yield curve, the arc of U.S. government bond yields across a spectrum of maturities, is another worrisome sign that the economy may soon hit a rocky patch. Since the 1960s, the inversion of the yield curve has been a fairly accurate predictor of a looming recession. Disruptions and the resulting displacements caused by technological innovation are likely to fuel this brewing perfect storm.
Without a significant accelerator, however, the storm is not likely to make landfall within the next year. While geopolitical forces currently send temporary shock waves through the stock markets and our retirement portfolios, these still need to play out over the next year before we are likely to start feeling their impact. Interest rates, while rising, remain at historically low levels, permitting troubled credits continued access to an abundance of relatively cheap money to refinance.
While the storm may not come soon enough for turnaround professionals, it is building momentum. To best position ourselves for opportunities when the storm finally hits, turnaround professionals are best served by being patient and, in the interim, analyzing sectors of the economy that are most likely to experience significant industry shifts and economic disruptions. This examination should look beyond first-level disruption and identify secondary industries which will be impacted by the trickle down or ripple effects. In addition to acquiring an understanding of those industries and their challenges, it is also important to build a network of key players in these industries in order to position ourselves at the center of those opportunities when they materialize.
As turnaround professionals we need to be more proactive and less reactive. We should all take a page from our colleagues in the non-turnaround space who have successfully positioned themselves to be ahead of the curve on cybersecurity, cryptocurrency, block chain, and cannabis opportunities.
The breadth of our membership provides access to insights across professions and across North American and international borders and uniquely positions TMA to assist our members in that journey. Both the 2017 TMA Annual Conference and the 2018 Distressed Investing Conference focused on visionary and prospective, rather than retrospective, programming, and the TMA Mid-America Regional Conference in April was aptly titled “Storms Brewing.” TMA has also sought to bring in more industry players to help our members obtain a better understanding of the distinct challenges that lie ahead in particular industries. In addition, TMA Europe’s Annual European Conference, “The Turnaround Profession of the Future,” examines new techniques, digital influences, and disruptive technologies.
Let TMA help you position yourself to be less like a storm chaser and more like a meteorologist.