Lately, I’ve been struggling with what it will mean to live in a world of slow to no growth.
First, I tried denial. There can’t be a world without growth.
Pick up any company annual report or analyst research report, they always project growth.
It’s in our Wall Street DNA.
We need growth to cover our costs, to justify higher salaries, to reward our shareholders?
But, what if, as is now widely expected, we face a global slowdown for our near-term future?
How do we behave in a slow to no growth world?
We’re going to have to rethink many of our basic assumptions. Here are a couple which come to mind.
First, I think cost control will become more critical without revenue growth to bail us out.
Will this trigger a power shift in companies? Will the path to become CEO now run through accounting?
Second, I think that, without growth, current cash flow is king. There’ll be more skepticism about the promise of future cash flow.
Will this spark a rash of corporate acquisitions as large, cash-flowing companies gobble up companies with no or low cash flow?
On the financing front, with slow to no growth, will companies borrow more to get as much financial leverage as possible.
Or, will equity securities change? Will we see more companies begin to pay dividends or do regular stock buybacks to pay a current return to their equity shareholders.
These are just a few ideas. There are many more potential implications.
Please contact me to discuss the capital markets implications for your company.
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