150 years ago a group of people profoundly interested in economic cycles started watching trends, over years and then decades. Thus developed the Economic Clock, based on an analog clock face, it breaks the clock into four cycles that the economy goes through locally and globally. They don’t always overlap simultaneously but these four cycles play out again and again, in the same sequence.
From a business building point of view, in an unnerving environment, where your resilience might be wearing thin, you can gain some comfort from this, because the economic clock shows that it will pass. What we don’t know is how long it will take us to move through the clockface into a more promising economic environment.
Listen to Pavlo Phitidis discuss the Economic Clock on The Money Show on 702 & CapeTalk here:
12 O-clock is the end of a boom period, when there’s lots of easy money, the boom builds until the bubble pops.
When the bubble pops, interest rates go up, share prices fall, commodity prices respond so that by 3 and 4 O-clock, money supply tightens up, as no-one wants to lend to anyone until the economy shrinks to its lowest at 6 O-clock. This is the lowest point of the cycle, it’s where we are now, we are in the middle of the bust cycle.
Governments then panic, they start to put money back into the economy, drop interest rates, businesses start to form, and while it is still marked by uncertainty, share prices rise, commodities follow and at around 9 O-clock we go into a boom cycle until 12 again.
It doesn’t work in a linear fashion, it is governed by politics and people in power.
It may not impact you as a business owner directly, but understanding that cycle helps you to make investment decisions at times of uncertainty, like now. If you make the right investment decisions and your business is still standing when that clock turns, you’ll be very well positioned to make up the lost revenues of the past 12 months.
We’re at 6 o-clock, and the urgency to act is that by 8 O-clock it may be too late to get ahead of the upturn.
The latest address by our President has put a lot of people into a negative mindset. But Pavlo’s take is ‘so what?’ The impact of policies might not be fair, just as Corona is not worried about fairness. Your business can’t rely on a fair environment. The only thing your business responds to is action.
Pavlo’s recommendation is to keep beneath the noise of the news, and the sentiment that follows. None of it is relevant because you can’t do anything about it.
You have to approach it assuming the worst – that things aren’t going to get better for 18 months, which leaves you with one choice – to prepare your business for the times we are in.
And that preparation is about finding the opportunities in the change. If you miss those opportunities now, you will fall behind, and not be positioned to take advantage now, or when the clock strikes 9 and we hit the next boom.
Crises occur one after the next, whether it’s Covid or a burst water pipe. You can’t avoid them, so all you can do is adjust your mindset.
If you’re needing a fresh perspective to shift yourself and your business out of a negative mindset, contact us.