While swings in inventories have not been the sole cause of recessions, in the postwar years all recessions have been accompanied by inventory corrections. Structurally lower inventory levels and the resulting dampening of inventory volatility are helping to moderate sharp fluctuations in U.S. economic growth. The implications of this theme still remain powerful for today's investor. With pricing power minimal, firms had both the need to do deals to generate revenue growth, and the ability to do deals. After six years of uninterrupted profit expansion, cash flow and balance sheets were strong, and dividend hikes were modest.
Past performance is no indication of future results.
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