On the Road: Phase B; Blissful and Blind

  • by itradmin - Wed, 01/24/2018 - 16:58
Business Cycle Phase C

The US economy is buzzing. The stock market is up, most businesses conquered the world in 2017, and, if the first few weeks are any indication, this year will be better than the last. We are relaxed, giddy even, with the optimism over what 2018 will bring for our businesses and ourselves. These are the tell-tale signs of Phase B, the accelerating growth phase of the business cycle. The ‘B’ stands for Best after all; but the ‘B’ can take on another meaning during the later stages of this phase: Blind. But only if you let it.

The optimism you feel today is okay, however, the primary difference between today and this time last year is that the US economy (and potentially your business) is closer to the end of Phase B than the beginning. US Gross Domestic Product (GDP) has been accelerating since the mid-point of 2016, and while we predict that slower growth is still a couple quarters away, it is coming nonetheless. You must resist the feeling of permanence that sets in during prolonged accelerating growth and stay realistic about how long the current run will last. Looking out for the negative is prudent but will not make you popular. Fortunately, as economists, we have few friends to alienate.

Now is the perfect time to assess where your business is at and what your 2018 looks like. If you track your rates-of-change and relevant leading indicators month by month, you will see a dynamic picture of the clouds transitioning from white and fluffy to gray and possibly foreboding. Some businesses may even find that the leading indicators point to a longer acceleration than anticipated. Have fun and enjoy the ride but do not stay on for too long.

Connor Lokar