As 2015 drew to a close with record temperatures in much of the U.S., private equity-backed CEOs and their investors stared into their crystal balls in an effort to build their business strategies for 2016. Over the last several years our firm has called upon noted macro-economist Dr. Allen Sinai of Decision Economics to weigh in with his forecast for the short and medium-term business climate. Here is what Dr. Sinai shared with us both in late 2013 and just last month as 2015 was wrapping up:
Dateline: December, 2013 |Location: Henderson House, Weston, MA |Assembled: CEOs of privately backed companies:
Dr. Allen Sinai declares the economy is set for “a long expansion…another 3 to 5 years in the US and global economies… and the business climate will be good and get better…. A long upturn… the best business economy in over a decade.”
2 Years Later, Dr. Sinai Makes a Curtain Call…
Dateline: November, 2015 |Location: Dane Estate, Chestnut Hill, MA |Assembled: CEOs of privately equity-backed companies and their investors:
Dr. Allen Sinai declares another “1 to 3 years of continued expansion….”
Most important in Sinai’s comments is the stark contrast to his prognostications of economic Armageddon in 2005-2006, when Allen said, “If I could have been in one of Elon Musk’s space ships fleeing from earth, I would have been….”
In his comments last month to a group of private equity-backed CEOs and their investors, Dr. Sinai shared the indexes, statistics and KPIs that his firm—Decision Economics—highlights to support his economic ebullience:
What does all of this add up to in the short and medium term? 5% odds of Recession.
Black swans Allen framed? These are those unexpected derailing events that—when a CEO or investors see them printed “above the fold” in the Wall Street Journal—are likely to drive a negative change in the economic forecast and derivative business reactions & behaviors:
Dr. Sinai summed up his comments by saying that the stock market despite periodic corrections in 2016 should be net up, private investing is likely to continue to be robust, and corporate profits to remain strong. A rosy forecast indeed from a macro-economist who is not known for selling irrational exuberance. While these prognostications may not be something you can take to the bank, they certainly may influence how CEOs approach strategic thinking and behavior toward growth in 2016.