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Economic Outlook: Q2 2022

Examine economic trends and the outlook for Q2 2022 based on data published by various Federal Reserve Banks, and insights gathered by Severin Sorensen, Executive Coach and Host of the Arete Coach Podcast who completed graduate studies in economics at King's College, Cambridge University (England), where he earned a M.Phil. degree in Economics.

Key topics include the global political economy, inflation, Federal Reserve Bank policy, economic impact of war, the impacts of inflation, green shoots of opportunity, economic headwinds, and recessions of times past. For business owners, CEOs, key executives, executive coaches, and executive peer group participants, these insights will equip you with the information needed to weather today's economic challenges.

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There are two ways to access the Q2 2022 Outlook. Click here to listen to the complimentary audio podcast, or click below to purchase the presentation to watch the video alongside the PDF slide deck.

Key highlights

Comparing concerns of business leaders: 2022 vs 2021

Timestamp 05:57

Severin starts his analysis of the current economic climate by comparing the primary concerns of business leaders in 2022 vs 2021. When reviewing the primary concerns of business leaders the past two years, a top concern has been money supply. While supply chain challenges were a concern in 2021, the supply chain is not as pertinent as it was last year. Instead, inflation and international conflict have become top concerns this year.

Examining the data

Timestamp 13:38

After reviewing primary concerns in 2022 vs 2021, Severin shares insight and data from the Federal Reserve Bank and other resources. Severin reviews the Consumer Price Index (CPI), Gross Domestic Product (GDP), potential GDP, retail sales, real estate market statistics, consumer confidence, Purchasing Managers Index (PMI), ISM Manufacturing Index, Non-Manufacturing Index, levels of employment, wage growth, Personal Consumption Expenditures (PCE), economic projections from the FOMC, and the Treasury Spread.

Reviewing recessions

Timestamp 32:31

Severin states, “this is the part where business owners really need to understand the most; all recessions begin and all recessions end.” He then goes on to explain the duration of recessions and factors that contribute to the length of a recession. Additionally, Severin reviews the effects of recession and the Federal Reserve’s response to the pandemic.

Ukraine-Russia War

Timestamp 34:42

The Ukraine-Russia War has had an impact on the global economy and the economies of Ukraine and Russia. Severin reviews the impact that war has had on the Ukrainian and Russian people and economy. He also reviews how the war has impacted the global economy. Furthermore, the general impact of war on economies is discussed.

In times of war, Severin shares that economies will typically face a loss of GDP, unless the war is somewhere outside the country in question. Additionally, Severin reviews insights regarding the effects of negative and positive events during wartime on the marketplace.

Severin shares that “having diversification production capacity will be very important for operations” and that a “distributed workforce” can also assist business leaders in times of war.

Regime changes and oil supply

Timestamp 44:50

In his research, Severin has found that “when you have a high degree of economic disruption… you have regime changes.” Currently, governing democracies are decreasing in number globally. Additionally, the prices of oil have increased. Severin states that “when oil shock rises 50% above trend, recessions follow.” The North American Strategic Oil Reserve is also discussed along with the potential of renewable energy sources.

Investigating inflation

Timestamp 54:19

Severin explains the definition of inflation as well as different sources of inflation. Some sources discussed include war, cost-push, and demand-pull inflation. Severin also explains money supply inflation and how the Federal Reserve can affect money supply and the real estate market. Severin goes on to share his own experience in the housing market and the housing cycle currently faced by the American economy. Housing inventory, the difficulty home buyers are having buying homes, and changes in interest rates are also reviewed.

Consumer Price Index (CPI)

Timestamp 01:09:21

Related to inflation, Severin reviews the Consumer Price Index and how the price index is “sticky.” Severin also shares how the price of wheat has increased which has contributed to inflation in a variety of widely used household products. Additionally, inflation has also affected interest rates and the price of houses. Due to the high cost of purchasing real estate, renting has become more affordable than purchasing a home. However, renting is still very costly at an increasing year-over-year rate of 17.8%.

Wage increases and labor shortages

Timestamp 01:15:18

Another concern facing business leaders is the reduced labor force. In response to the lack of labor available, business leaders are facing wage increases and looking towards artificial intelligence (AI) or automation. Severin shares insights from his executive search and selection experience and states that employers have to have “a more attractive offer” for job applicants who have multiple job offers and opportunities. Furthermore, insights from the Federal Reserve Bank of Atlanta “shows that if you’re a job switcher, you’ll make more many than if you stay in your company.”

Aside from the labor shortage, another reason for increased wages is inflation. “Inflation is robbing people of their purchasing power” and increasing worker dissatisfaction. Because of this, employees are looking to regain their purchasing power via wage increases, the Free Agent economy, and digital nomadism. This finding also correlates with the misery index which analyzes inflation and unemployment.

Supply chain risk mitigation

Timestamp 01:23:31

In 2022, supply chain risk mitigation has remained a concern for business leaders. Currently, “globalization is proving unreliable and is starting to unwind” due to freight costs and the political climate. Severin states that “individual supplier capacity, financial strength, their standard operating procedures, [and] how they build their quality controls are ongoing challenges that need to be monitored.” In the face of shortages, political challenges, organized crime, cyberattacks, and weather changes, business leaders must be ready to adapt and change if their supply chain is disrupted.

Bull and bear cases for the current market

Timestamp 01:25:12

Severin outlines both the bull and bear cases for the marketplace. In terms of the bull case for the market, Severin shares that the geopolitical risk is primarily in Eastern Europe and when the Ukraine Russia war ends, it will likely be a “coiled spring for the markets.” Economists also indicate that inflation is transitory, and consumers are still buying goods. Certain assets can also appreciate more in inflationary economies. For the bear case, geopolitical uncertainty still remains a large concern. The Ukraine-Russia war along with the increase in autocracies, conflict, and oil prices are also of concern. Furthermore, producers cannot push the entire cost of inflation on consumers and global supply chain issues remain prevalent.

Recessions of the past

Timestamp 01:33:19

Because the duration of recessions vary, Severin examines the duration of previous recessions. In doing so, data of previous recessions and how long it took for the economy to recover per recession is reviewed. In looking at past recessions, Severin also explains what dead cat bounces are. He explains that it is important for business leaders to examine trends beyond the day-to-day increases and decreases in the marketplace. He states, “you got to look at things with a little longer point of view.” Additionally, he examines where people have stored their money during seasons of inflation. In examining this, he identifies several categories of assets that have the potential for hedging inflation rates.

About Severin Sorensen

Severin Sorensen is a serial entrepreneur and lifetime learner with a passionate curiosity for people and businesses. Severin is the CEO of ePraxis LLC, a premier level retained search firm that provides executive headhunting, talent selection, and executive coaching. In addition to finding top talent, Severin has provided over 7,500+ hours of paid executive coaching to entrepreneurs, CEOs, Presidents, and C-level executives. Severin is an ICF ACSTH Certified Executive Coach, Certified Organizational Development Coach, and Certified Life Coach. Severin is the founder/producer of a new podcast, Arete Coach, that explores the art and science of executive coaching with some of the industry's best coaches.

From 2010-2018 Severin was also a Vistage Chair where he coached three CEO and key executive groups. In 2011, Severin received the "Rookie of the Year Chair Award" from Vistage. Since 2013, Severin has added international speaking for Vistage, CEO conferences, executive peer groups, and corporations on the topic of identifying and hiring difference-making top talent.

After graduate school, Severin moved to Washington, DC, where he worked on security-related economic and public policy issues that included a brief stint in The White House, as a Special Assistant to the President, for George H. Bush (POTUS 41). In 1994, Severin founded Sparta Consulting Corp., and Sparta provided world-class physical security and safety related management consulting services for public and private sector entities. From 1994-2002, Severin managed HUD's Crime Prevention Through Environmental Design technical assistance and training program. In 2005, Severin sold Sparta to Westec Interactive (Digital Witness), which was subsequently acquired by Interface Security.

Severin, a native Californian, grew up in Salt Lake City, UT and graduated with honors from the University of Utah with Economics and Political Science degrees. He completed graduate studies in economics at King's College, Cambridge University (England), where he earned a M.Phil. degree in Economics. Severin has a great love and appreciation for sports, and while overseas, Severin rowed for the King's College Boat Club, and played basketball for the Cambridge University Basketball Team (1986-87).

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