A coming recession will be different this time — really, investment strategist says at Denver event – Denver Business Journal

See Correction/Clarification at end of article

It’s the one thing investors should never say when predicting the economy.

"It’s different this time."

But this time it is, said John Lynch, executive vice president and chief investment strategist at Boston-based LPL Financial.

Lynch spoke at the annual Vectra Bank Colorado Economic Forecast event Wednesday in downtown Denver.

Today’s economy and monetary policy are different from the time leading up to the Great Recession, which began in 2007 and ended in 2009, he said.

Central banks have quintupled their balance sheets over the last eight years, artificially suppressing the short end of the curve and really leveling the playing field, he said. And that resulted in companies having access to low and invariable cost of capital.

Everybody had the same hand, he said. With interest rates going up — even slightly — it may separate the strong from the weak. “And that will be an important development,” Lynch said.

But more importantly, a coming recession won’t resemble the two previous recessions because U.S. economic growth has hovered about 2 to 3 percent — meaning the economy won’t fall off a cliff, more like a curb.

“I don’t want to be overly dismissive of the pain that a recession can cause, but the idea that it’s going to be a 2008 scenario – we don’t have the leverage in the system that enabled us to grow 5 and 6 percent in 2005, 2006 and 2007.”

“I submit the next recession, when it happens, will have occurred by the time we know of it," he said.

In Colorado, the state’s economy will continue to grow this year, and the state is expected to add about 50,000 jobs, said Patty Silverstein, president and chief economist of Development Research Partners, who prepares economic forecasts for the Metro Denver Economic Development Corporation.

Of those jobs, 31,000 will be in metro Denver, which represents about 62 percent of the state’s employment. That’s a slower growth rate than the previous years, she said. And it all comes down to labor, she said.

“It’s not that companies don’t want to grow,” she said. “But truly, finding workers will be a challenge.”

Still, new construction continues to be added with projects in 2018 already underway. In the coming year, there will still be a great deal of action in office, industrial and retail space added, Silverstein said.

In 2017, metro Denver added 3 million square feet of office space, and there is 5 million under construction now. In industrial real estate, metro Denver added 5.3 million square feet in 2017 and has 5.8 million under construction.

And retail is doing well despite the growth of e-commerce. In 2017, metro Denver added 1.6 million square feet of retail space. And is on track to add 1.5 million square feet in 2018.

“I think the word is positive,” said Bruce Alexander, president and CEO of Vectra Bank in Denver, which is a division of Salt Lake City-based Zions Bancorporation. Our economy seems to be in balance. Interest rates are in balance. There aren’t excesses in the market. And the other thing is the core return to fundamentals – that those companies that are balancing their growth, balancing their balance sheets if you will, that they are really well-poised for the future.

"With all this investment coming out of the tax bill, that it will stimulate growth in a way that will be sustainable."

That means the question Alexander will be asking the businesses he banks is, "What is the Uber of your business?" he said.

Companies need to be anticipating the impact of technology, he said.

"I mean, for example, it has dramatically changed retail," Alexander said. "Many companies have just disappeared because they did not anticipate what was coming. Even if you run your company really well, if you miss what is the Uber of your business, you could disappear."

2017 Largest Banks by Deposits

Ranked by Inside Deposits

Rank Business name Inside Deposits 1 Wells Fargo Bank NA $24.3 billion 2 FirstBank $12 billion 3 U.S. Bank NA $11.9 billion View This List
Correction/Clarification

This story has been corrected. An earlier version had incorrect retail space numbers.

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