Building Resiliency

(1st Quarter 2019)


  • Successful valuations are a function of successful operations and financial policy
  • Developing a dividend strategy
  • Using share buybacks as a tactical tool
  • Managing market expectations through guidance
  • Achieving the optimal fixed-floating debt mix




The financial crisis of 2008 is now more than a decade behind us. The past ten years witnessed rising equity valuations and stock prices as well as increasing business confidence and mergers and acquisitions (M&A) activity. This improvement in Keynes' "animal spirits" has happened during the economic backdrop of a low interest rate environment further stimulated in the U.S. by the Tax Cut and Jobs Act announced in 2017, which has supported multiple expansion. In hindsight, we have seen a highly constructive business and capital markets environment (see Exhibit 1 below)1.

Still, the market volatility and declines that occurred during the last few months of 2018 have resurrected worries about the next downturn. Inevitably, as expansions sustain, we all begin to wonder when it ends and when the next recession is coming. In this context, it is worth noting that economic recoveries and expansions do not die of old age, they require adverse conditions or shocks. Admittedly, these shocks can come from a variety of different dimensions, but they are not inevitable2; Australia has not experienced an economic contraction since 19913.


Also, recent experience can often taint our perspectives … even with the extreme volatility of the final quarter of 2018,. markets finished down just 4.4% for the year4. All to say that worries about a pending downturn may be excessive but admittedly may never be far from the minds of astute and thoughtful managers of businesses.


This paper, the twelfth in our ongoing series of Credit Suisse Corporate Insights, does not seek to predict or forecast the next downturn. Instead, we thought it prudent to take this opportunity to evaluate the kinds of steps companies can take to successfully navigate any economic headwinds – even in times when investors do not focus on a company's operations.


1 Source: FactSet. Sample equals a stable cohort of current S&P 1500 constituents.
2 Source: Krugman, Paul. "A Smorgasbord Recession?" NY Times. The New York Times Company. September 18, 2018.
3 Source: Heath, Michael. "This Is Why Australia Hasn’t Had a Recession in Over 25 Years", Bloomberg. March 30, 2017.
4 See endnote 1.