Last week’s employment report is a perfect reminder for investors trying to plan for different scenarios. The forecast for April employment in the U.S. was for more than one million jobs to be created. The actual figure is usually within plus or minus 10% of the economists’ forecast but April’s number was off by 75% — just 266,000 jobs created.
Private market investors need to react to this now, because when the U.S. doesn’t create jobs obviously that ripples throughout the entire economy. What does it mean in terms of valuations? What does it mean in terms of the portfolios with these different scenarios? What about inflation? Will office occupancy predictions change? Will mortgage defaults or rental defaults or evictions change?
These all have huge implications to valuations. Being able to make a decision today versus two weeks from now can have a significant impact on fund performance. If you can go from weeks to gain insights to days you can be a step ahead of your competition, either in terms of revaluing your portfolio, selling or buying assets, or in keeping your investors informed.
It’s like my favorite video clip from Margin Call where the CEO says “I get paid the big bucks because I can predict when the music is going to slow down, when it’s going to speed up, and when it’s going to stop before my competitors will and I can make a huge impact in terms of the financial performance of the company.”
While the public market may not be reacting to the latest employment news, smart investors are out there are analyzing what it means, what decisions they can make, and what they can do to get ahead of their competition. What’s your time to do a full round of scenario and valuation analysis? Are you able to do it in hours, days, or weeks?
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