Robinson Analytics Nashville Economic Forecast

Robinson Analytics Nashville Economic Forecast

Robinson Analytics decided to take a look into forecasting Nashville, TN economy coming out of this Covid-19 Pandemic recession. I wanted to get a feel for how the local economy might perform in relation to the overall United States economy.

My approach was to do some financial markets analysis to get a feel what might be happening in the underlying economy going forward (Financial markets are forward looking for the underlying economy.). I developed a basket of publicly traded firms to develop an index for the region. My approach was to use 19 of the publicly traded companies that the Nashville Chamber has listed on their site as major employers in the region.

The first chart below is a visualization of the evaluation of the 19 firms in this basket, the Robinson Analytics Nashville Market Cap Weighted Index and the Standard & Poor’s 500 index.

What this chart communicates via the index I created is that the local Nashville economy will perform inline with the national economy coming out of this recession. That it will perform on average with the country. Which communicates to me that the local economy’s growth will be slow going coming out of this recession as the nation will be.

My next step was to go beyond an average return over the past year, but to take into account risk. The chart below expresses the above returns with risk over the past year taken into account.

When I take risk into account, the Nashville economy starts to diverge from the national economy. What this chart is telling us is that there is more risk in these basket of stocks or the Robinson Analytics Nashville index than the S & P 500 index. For example, in the first chart both Dell and the Gap have an average return of -29%. These two seem they are performing poorly about evenly. However, when I apply the risk factor to the return, you see that Dell is way more riskier. This index is reflecting the fact that Dell has experienced operating losses for three of the past 4 years. Whereas, the Gap has a positive operating income over the past 4 years, but their last year of operating profit is less than half the preceding year.

Looking at the other side of the spectrum, I would expect Dollar General to perform the best over the next 6 to 9 months by far over any of the other basket of firms.

I next took a look at to see what probability during the year we could have exited the markets and gotten a positive return. As you can see in the chart below, 75% of the time during the past year, we could have exited the S &P 500 and got a positive return. 64% of the time over the past year we could say the same for the Robinson Analytics Nashville Index basket of firms.

So about two thirds of the time over the next 6 to 9 months, Nashville community firms should experience a positive return on their business activity. As an example, with Dell and the Gap, we could not have exited their stock during the year and got a positive result. However, for Dollar General, 98% of the time over the past year we could have exited the stock and got a positive return.

I would forecast that there is going to be a period of 2 to 3 months going forward that is going to be very challenging for local businesses. This would of course depend on whether or not we have a second phase to this Covid-19 outbreak.

In conclusion,

• We should expect to see moderate growth in the Nashville business community over the next 6 to 9 months. Nashville’s growth should mirror that of the overall economy.
• There is more risk or volatility in the local economy than in the overall national economy. Which means that average return on business performance is not as sure as the nation’s economy. The job of local leaders are to assess these risks and to try to mitigate them to maximize business performance.
  • To learn more about the risk to the local economy that I have identified through this financial analysis, you can access the recent local entrepreneur survey results that was conducted by EO Nashville by clicking here.
• We believe that about two thirds of the time local businesses should provide a positive return on their activity over the next 6 to 9 month’s. However, about one third of the time, they will not experience positive returns on their business activity. How can we help local businesses to weather this storm?

“We use analytics on your work and business processes to gather the critical insights that you need to impact your business performance.”Click here to schedule a complimentary discussion session about how Robinson Analytics can help you.  To learn more, you can access his website at www.robinsonanalytics.com.