The US economy needs a turnaround. How do we get there?
When consultants look at an ailing business, they do a SWOT analysis: strengths, weaknesses, opportunities, and threats. If you can seize the opportunities, playing to your strengths—avoiding weaknesses and be mindful of the threats out there, often you can spin straw into gold and create growth where previously there was only stagnation. So what would SWOT analysis say about America?
Clearly, we are strong in design and innovation. The iPhone 5 and latest genetic therapies show the US is on the technological cutting edge, creating products and services in use around the world. Where we are weak is in consumer demand: we’re still repairing our balance sheets and recovering from the housing hangover. So where are the opportunities? Emerging economies—Latin America, Africa, and Asia—have been soaring. Those areas, with an emergent middle class, have plenty of growth. And threats? The usual suspects: the Middle East, leftover weapons from the Cold War, and our own stultifying politics.
Notice that China is not on the “threat” list. It really represents an opportunity for us. They may be able to reverse-engineer the last iPhone, but they can’t come up with the next one. And it’s more effective to employ their engineers at Foxconn where they work for Apple and Cisco. Then Chinese workers have a vested interest in US patent rights.
Economic (and investment) success comes from finding sources of growth and catering to that demand. As emerging economies begin to consumer more, developed economies can advance by designing products that meet their needs. That way we can all prosper.
Douglas R. Tengdin, CFA
Chief Investment Officer
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