AVMA: The state of the U.S. economy

alexlmx/stock.adobe.comBesides discussing the veterinary economy, Matthew Salois, PhD, gave an overview of the U.S. economy at the most recent AVMA Economic Summit. He started with four economic indicators and their status in terms of cause for concern (red: major, yellow: moderate, and green: little cause for concern). Here's where things stand, according to Salois' reading of the signs:

1. Unemployment is near a 50-year low, and the rate is showing no signs of upticking, Salois said. Status: Green.

2. Yield curve is a measure of investor confidence that compares short-term and long-term interest rates, and it's gone negative. This is cause for concern, Salois said, but it may be less relevant than it used to be-it's certainly not cause for panic, he said. Status: Yellow.

3. Manufacturing shows signs of contracting, but Salois notes that it no longer drives the American economy, and it's being battered by other factors, not just the economy. Status: Yellow.

4. Consumer confidence is flat from last year, Salois said. However, it's not declining so steeply (15% or more) that it's in the danger zone. Status: Yellow.

Overall, Salois thinks cause for concern regarding the economy is somewhere between green and yellow.

Another hot question Salois addressed: When will the next recession hit? A poll of CEOs in September indicated that they didn't expect a recession “anytime soon”; economists predict it will come at the end of 2021. Four factors could have an effect, Salois said: the trade war with China (which introduces lots of uncertainty), China's economic performance (there are signs of slowing), Brexit (more uncertainty), and FAANG stocks (Facebook, Amazon, Apple, Netflix and Google), which point the way for the overall market. “There is no reason to panic, but there is every reason to prepare,” Salois concluded.

So what should your organization be doing in the meantime? Here are some of Salois' suggestions:

1. Deleverage and manage cash flow. This is what Amazon did before the dotcom bust, which helped it stay alive, Salois said. The goal? “Don't run out of money,” Salois said. Reduce your debt burden, increase liquidity, lower your interest rates (consider refinancing), and build a backlog of business (look for new clients).

2. Invest in technology. “Don't just batten down the hatches and play it safe,” Salois urges. Now is the time to fund IT initiatives, because digital reduces cost and increases business agility.

3. Pivot the (management) mindset. It's time to decentralize decision-making, Salois said. Delegate responsibility to colleagues, and remember that local information is more important than global. Avoid layoffs if you can and take the opportunity to snag top talent.

As an individual investor, it pays to watch indicators carefully. “Read market news every day, but don't overreact to positive or negative news,” Salois said. Adjust your investment to balance risk and return, pay off debt and accumulate healthy savings. And if you need credit, apply now, Salois said.