According to CNN this morning, General Electric(GE) has announced a 31% increase in earnings for the fourth quarter of last year, with gains in most areas of the company. They pointed out that GE has its hands in so many aspects of the US economy that their performance is a strong indicator of the health of the overall business climate. GE CEO Jeffrey Immelt has subsequently been selected to help the Obama Administration increase private sector jobs in this difficult economy.
Simultaneously, Charlotte’s own Bank of America announced a 4 cents per share profit compared to the expectation of 14 cents per share analysts expected. The write-downs related to the home mortgage sector have weighed heavily on the performance of the company. Even though recent agreements seem to be putting this issue to rest, there will be a necessary period of reputation recovery.
From the view of the federal government, President Obama has been vocal about the progress, as there have been 12 months of private-sector growth in jobs for the first time since 2006. However, a CNN/Opinion Research poll shows at least three-quarters of Americans consider economic conditions to be poor. Some notable economists are predicting it will be 2015 before the economy significantly improves.
Internationally, China has indicated that interest rates will begin to rise there shortly, with an attempt to slow down their torrid rate of growth. While the growth seems enviable, the risks associated with the investments in this growth could make China’s ability to invest in the US debt more difficult. The increase in interest rates will also slow down domestic China consumption, which could unfortunately affect US exports.
It is difficult to get a grasp on the overall health and morale in the workplace based on this roller coaster of economic news. The similarities to the children’s book, “Good News, Bad News”, begin to show themselves, where each bit of news creates opportunity and risk. This brings to light a potential strategy for building business plans over the next few years.
Rather than a linear growth plan, with a timeline of activities, one after the other, companies will be more likely to build a “good news, bad news” type of plan, with decisions based in conditions in the market at the time. A matrix business plan with more frequent analysis and “if, then” scenario planning will make sense not only for large corporations, but to small and medium corporations as well.
Investors will have to become even savvier as a result, understanding risks and rewards of not just the one business plan, but for each option in the business plan matrix. However, as investors open up their funds, and companies free up capital, this method of planning can actually lower risk and accelerate return.
As GE has shown with their broad portfolio of businesses, the possibility of growth is real, but BofA shows that the past will not easily be forgotten. The ultimate outcome for the economy is still in doubt, but the markets in general believe there is more Good News than Bad News. Let’s hope so, but plan wisely regardless.