industries are well positioned for high growth in the near term. Those
industries that are doing best include the energy materials industry,
the space and defense industries, health services, and government
sectors. Some industries that just a few months ago were considered the
hottest prospects for future investment have suddenly taken an
immediate turn for the worse.
A good example is the
solar/photovoltaics sector, which has been hit particularly hard by the
sudden drop in oil prices; this sets its goal of meeting "grid parity"
a step back. Also experiencing this sudden downturn are commodity-based
exporters who are suddenly feeling the impact of a global slowdown in
world demand, the subsequent drop in commodity pricing, and a rising
Of course, the financial services, construction, and the
automotive industries have suffered the most so far, and they are
expected to suffer significantly more losses going forward.
What Does It All Mean?
least well into 2009, the capital investment picture does not look good
as companies and countries deal with falling demand, scarce project
financing, rising costs, and growing inventories. We may be on the back
end of the financial crisis, but just beginning a longer period of
economic slowdown. How long the recovery will take depends largely on
four key factors:
1. The price of oil - Prices stabilization at
around $70 per barrel would be realistic from a sustainability
standpoint, whereas prices above $125 would impede a recovery.
The Obama administration - The new president must work with global
policymakers to make smart decisions in resolving the financial and
economic crises by managing mortgage write-downs wisely and
implementing the stimulus package fairly. Success will depend on fixing
3. The role of emerging countries - Emerging
economies must cooperate with the OECD nations and work together to
make new, modern repairs to this very complex network of international
finance, trade, and investment. Only then will consumer demand and
smart, long-term vision drive the global economy toward more
sustainable economic growth.
4. Engaged businesspeople - Much
will depend on the resilience and ingenuity of businesses to survive.
As we have already seen in such dramatic fashion over the past few
weeks, even globally known businesses are constantly required to make
sound business decisions in today's ultra-competitive marketplace - or
they will not be around for long.
In sum, capital investment is
experiencing many hurdles these days, and these will remain difficult
to overcome in the short term. However, there is every reason to
believe that the mid-term to long-term outlook is quite positive, as
such downturns tend to be periods of intense fine-tuning and
improvement of the investment environment as a whole and of businesses
bent on success. Hopefully, more successful policies and oversight will
be put in place to improve the environment, and smarter companies will
emerge as leading enterprises embracing global best practices.