Perspectives – Marc Cooper – January 2024

Embrace Change in An Uncertain World

by CEO Marc S. Cooper

The future is an ever-shifting maze of eventualities until one of them becomes a reality. Despite our best efforts to anticipate the course of human events, life tends to surprise us.

Reflecting on the whirlwind of plot twists over the past year, it is remarkable to me how quickly sentiment has shifted on Wall Street about the American economic outlook. The underlying strength of US consumers, companies, and financial institutions has defied the pessimists.

Consider that in December 2022, around 70% of economists in a Bloomberg poll expected the US economy to plunge into a recession within the next 12 months.

Instead came months of job gains, fading inflation, and robust consumer spending. The Federal Reserve’s credit tightening cycle appears to have come to an end, and it increasingly looks like Fed Chairman Jerome Powell and his team have pulled off a soft landing.

As we start a new year, the proverbial animal spirits are stirring on Wall Street. Economic optimists are now preoccupied with predicting when interest rates might start to descend to more appealing levels.

Few in the merger and acquisition advisory world wouldn’t welcome a more accommodative credit environment. And yet — for the long-term prospects of the broader US economy — I would like to see rates decline gradually, rather than precipitously.

In my view, the ultra-easy money over the past 15 years has left some businesses deluged with debt. When lending standards are more rigorous, corporate leaders are under greater pressure to make sure the business logic underpinning their investment plans is unassailable. I believe sustainable US economic growth and price stability should be the overarching goals of policymakers.

When it comes to geopolitics, the media narrative has also undergone a 180-degree shift over the past year. A year ago, many were fearful the conflict in Eastern Europe might expand into a World War III-scale global conflict, perhaps involving the use of tactical nuclear weapons. Russian aggression in Ukraine is still a huge risk going forward. Yet if anything, the conflict now resembles the stalemate Russia faced in Afghanistan, with no clear winner.

Heading into 2024, the world’s focus has shifted dramatically to the Middle East, where a crisis has unfolded in the wake of the Hamas terrorist attack on Israeli citizens on October 7. This clash, with its potential to escalate into a conflagration in a region that is home to the world’s biggest oil producers, adds a new layer of complexity and risk to the global landscape.

Our brains are hard-wired to imagine potential future scenarios, yet it’s interesting to me how often we’re startled by unforeseen events. Maybe we shouldn’t be.

The financial, economic, and political systems that govern our world are complex, and it’s wise to confront that reality with a healthy dose of humility when it comes to our predictive powers. As the Nobel Prize-winning physicist Neils Bohr famously quipped: “Prediction is very difficult, especially if it’s about the future.”

That said, I’m approaching 2024 with a sense of cautious optimism. Amid a volatile global backdrop, the US has demonstrated time and again a remarkable resilience.

Whatever the challenges of our politics, fiscal burdens, and current soul-searching at our top universities, America’s technological prowess, deep financial sector, and formidable military strength remain the envy of the world. The country continues to be a magnet for talented individuals worldwide.

Yes, there will be surprises in the months ahead, and not all of them will be welcome. Yet for business leaders, the task is clear. Anticipate the future the best you can but be ready for alternative scenarios. Stay focused on your business’s long-term objectives, and develop the organizational agility necessary to adjust quickly to unanticipated shocks and obstacles.

The exact trajectory of the journey ahead is ultimately unknowable — but therein lies the potential for positive change. Organizations in it for the long haul plan meticulously, cultivate an adaptable workforce, and, above all, expect the unexpected.