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November 12, 2020 02:54 PM

COVID-19 brings caution, and opportunity, economist says

Jim Johnson
Rubber & Plastics News Staff
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    AKRON—COVID-19 and the disruption caused by the pandemic does not mean there is all bad news when it comes to economic opportunity.

    Bill Wood, founder of Mountaintop Economics & Research Inc., said Nov. 12 that, while these economic times are certainly, well, more uncertain, businesses can position themselves for success.

    "I think there are a lot of opportunities right now," Wood said during the virtual International Silicones Conference hosted by Rubber & Plastics News. "There are a lot of opportunities. Interest rates are low if you need to finance something. I would say be aggressive in your outlook, in your approach to markets. But make sure you do the homework, the due diligence. If this is a time now that you are spending out of desperation and just hope to hang on, I don't think that's necessarily going to be fruitful."

    But for those in a position to make some moves, these days are providing opportunities, he said.

    "I know that the people who I look up to in the financial sector, the economic sector, who do have that posture," he said. "They are looking very aggressively at bargains, at deals and acquisitions and things they can produce at a discount rate.

    "I would say this is actually a time to be aggressive in your approach toward market share."

    While the economist said there is opportunity for the strongly positioned to capitalize on market downturns caused by the pandemic, he also cautioned companies need to adapt to market volatility and conditions to weather the storm.

    He said businesses must prepare for different scenarios to play out due to the uncertainty that COVID-19 brings.

    "To me, this is a time for humility, less certainty, more inquiry," Wood said. "You've got to stay balanced. You've got to stay continually prepared for something else happening that we may not have anticipated. This doesn't mean that you don't plan. It means that you must pay particular attention to planning for alternative hypothesis.

    "Some of this may actually turn out really good, but we have to be prepared for this to go both directions. So the dangers are large, still, I can't lie to you. There's still danger out there, but I think there's a lot of opportunities as well."

    Risk is not all necessarily bad, he said. And businesses must understand that and be prepared.

    "Ignoring the risks doesn't make them go away. Not knowing about them doesn't make them go away," Wood said. "There's still danger out there, but I think there's a lot of opportunities as well."

    Wood suggested people develop their own dashboards with economic indicators they have grown to trust over time to help make business decisions.

    "You constantly have to observe and measure," he said. "Engage it yourself."

    The economist also believes in the need for another round of economic stimulus to help the country get through the current turmoil.

    Providing such aid will help keep the U.S. out of extended economic problems like the Great Depression. The country can avoid such a situation and then be positioned to pay off the additional debt created by the payments, Wood said.

    Silicones are used in a wide variety of applications, and the economist picked out a few markets to highlight during his presentation, including home construction.

    "It not only is the preeminent indicator for activity in the construction sector, but it's also the preeminent indicator of consumer confidence—their willingness to spend on all types of goods, both durable and non-durable, their willingness to spend on services like painting and plumbing and lawn care and security and those kinds of things," he said. "Everything is better in this economy when it's a good time to have a new house."

    Housing starts were up 11 percent in the third quarter, Wood said.

    "The best we've seen in a long, long time," he said.

    For the full year, the number of new housing starts will be in the high single digits for the year, he said, with growth continuing into 2021.

    "It's going to be good for the residential housing sector at least for another year," he said.

    After being battered during the second quarter with the biggest decline ever in sales, motor vehicle assemblies were up 3 percent for the third quarter.

    "To say that we're back up to where we were a year ago in this market is encouraging," Wood said. But the industry still has "a long way to go to make up for all the assemblies that were lost in the second quarter. But this is getting better."

    In the medical equipment segment, the decrease was 20 percent during the second quarter but improved to a 6-percent decrease in the third quarter.

    Wood used himself as an example of what's going on in the health care industry these days.

    "I can't get discretionary activity done," he said. "I can't get appointments made. So I think we're going to rotate out of all of the PPE (personal protective equipment) into more the typical type of consumption of medical equipment and supplies, but I'm not sure when. I'm sure that there is going to be a demand once we get past this second (COVID-19) wave, a demand to stockpile this kind of equipment and products. So if that's your market I think you've got a lot of open field in front of you."

    Ultimately, Wood said, the recovery is on solid ground.

    "Consumer sentiment is still holding up," he said. "Business sentiment is still pretty good. Durable goods and capital goods are better than you would expect given the huge decline recently. So, all in all, I'm optimistic, I'm positive, but very cautious."

    Related Article
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