Ah, Summer. Time to head to the lake, the beach, the backyard. Time to put our feet up, fire up the grill, read a novel perhaps. On the other hand, it may be time to commit to some of the most intensive economic and market analysis we have done for a while.
At the mid-year point—depending on your asset mix, geographic mix, choice of capitalization sector, and industry sector—your mid-year over last year end could be anything from pretty good to downright disappointing. Add to this considerable uncertainty around economic and tax policy, not to mention healthcare policy and geopolitics. Beyond the macro decisions, there are some emerging developments that require us to have a good think about our fundamental approaches to the age-old question of present-value calculations—especially in the still nascent developments in manufacturing and distribution, from advances, for example, in 3D printing, flexible plant design, breakthroughs at the intersection of medicine and engineering, not to mention significant disruption in sectors such as grocery and pharmaceutical. We have significant financial modeling to do to understand the certainty of future cash flows relative to capital investment decisions being made by the sectors and individual businesses that we follow. To be blunt, my sense is that while some innovations are going to result in significant returns, others are going to be financial sinkholes—some fundamental thinking and risk assessment is required of us.
Yes, this summer may be a time to go back to the fundamentals of finance and economics, and to revisit decisions about where to seek growth, and where to seek safety, depending on our clients’ needs for income and capital preservation. To me, this means going all the way back to works like Burton Malkiel’s A Random Walk Down Wall Street, to deepen and renew knowledge of economic and fiscal policy; and then on to reading about and researching emerging, or dramatically changing, sectors and companies.
This kind of summer reading is going to pay off the next time you meet with a client, especially those who are doing the same investigative work themselves this summer.
If I may add, this is also a wonderful time to revisit our plans and considerations for those community-related activities that we are either involved with already or are thinking about—in the end, all economic activity, if it is to be sustained for the long term, requires that no community gets left behind. Where can you put your talents and passion to work?
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