Economic Projections for 2016: Long-Term Commitments & Short-Term Flexibility
This corporate success brings promise for the new year, with a pause, while facing current economic realities
Damian McKinney, President & CEO of McKinney Capital & Advisory
In the face of economic uncertainty, what can we do?
I often hear other CEOs affirm that 2015 was a record, or near record year for top line revenues of their companies. However, many of these companies are able to boast this record performance after having worked out of a recessionary period of lean times, maintaining minimal overhead, and only electing to grow infrastructure in the last couple of years.
This corporate success brings promise for the new year, with a pause, while facing current economic realities. Oil prices have rapidly fallen, producing record losses for the oil and related industries. The stock market has been swinging more tumultuously than ever recorded previously for the month of January. China’s Gross Domestic Product (GDP) has developed at an ever-slowing pace since mid-2015. Major US-based corporations are announcing corporate headquarter moves to offshore countries with lower tax structures. Still, U.S. job growth has remained steady, and overall government spending has increased. The combined force of these conflicting views gives us reason to pause and reflect on what is in store for 2016, and how we may strategically plan for our future.
We, here at McKinney Capital & Advisory, have been proactive in creating strategic plans designed to provide financial flexibility for our clients’ short and long-term commitments. Creating financial flexibility entails helping our clients to rightsize their overhead and review long-term commitments in anticipation of an uncertain future. Hence, our clients’ conflicting goals: (a) to be in a position to grow today with (b) the flexibility to change direction on short notice, should a recession be imminent. Although we believe 2016 will face more of the same economic trends of a 2% GDP, coupled with unforeseeable government decisions until post-election, the economy should be relatively flatlined until mid-2017. We recommend long-term commitments to be made with care, in consideration of shifting market conditions. However, adjusting is not a simple task. Large capital expenditures are required to grow the company, maintain consumer demands, and invest in or accommodate for rapidly-improving technology.
Even so, consumers and businesses alike can take comfort in that there are plenty of signs to suggest that the U.S. will weather the worldwide storm of slowing trends, global unrest, and unstable financial markets from the recent labor market reports. Moving forward, treading slowly and steadily can minimize the impact of economic insecurity. My father once told me, “You don’t have time to worry. You have to get back to work.” I interpreted his words as urging me to channel energy in the right way to cope with economic stress. Proceeding with cautious optimism will ensure that companies are realistic with their financial decisions in 2016.
Lee, Don. “Is the U.S. Due for a Recession or Not? A Case Can Be Made Either Way.” Los Angeles Times.
“Employment Situation Summary.” U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics
Damian McKinney has 35 years of experience in national commercial real estate brokerage and investment. He has been recognized as one of the nation’s preeminent corporate services advisors since 1979. McKinney Capital & Advisory is a full-service real estate firm that focuses on the representation of clients in order to optimize the value of their real estate assets. McKinney represents clients worldwide in all stages of acquisition, disposition, and financing of commercial real estate. To learn more about our advisory services, call +1 858 519 3240, or visit us at www.mckinneycapital.com