On Tuesday, June 4, William Blair kicked off its 44th annual Growth Stock Conference, a three-day event featuring more than 250 public and private companies. First held in 1981, the firm’s biggest annual event continues to be a premier conference for investors.

This year’s conference featured companies spanning the market-cap spectrum in seven sectors—consumer; energy and sustainability; global industrial infrastructure; global services; financial services and technology; healthcare; and technology, media, and communications. In addition to the formal presentations by the management teams of presenting companies—nearly 99% of which were represented by the highest ranks of management this year (chairman, chief executive officer, president, chief financial officer, or chief operating officer)—William Blair hosted nearly 5,000 one-on-one meetings between investors and management teams.

William Blair Macro Analyst Richard de Chazal sees the conference as an opportunity to gauge the economic reality from the bottom-up, relative to the “normal” macro top-down view, as shared in his latest report below.

Richard De Chazal
Richard de Chazal, CFA, Macro Analyst, Equity Research

Caution Around Current Growth, Realistically Constructive About the Future

Through the conference’s commentary across various sector landscapes, we create a snapshot of an economy that’s still normalizing following the COVID-19 pandemic, experiencing rolling pockets of weakness, but is not in recession and seems to be expanding at a moderate pace.

Employment growth, however, is decelerating but has yet to be in outright decline. Helpfully, for the Fed and consumers, pricing also seems to be significantly lower. Still, some companies also told us they were forecasting their pricing growth at a slightly higher rate than pre-COVID-19. Meanwhile, most sectors are also positioning themselves (or are already starting) to benefit from strong structural tailwinds, including electrification, AI, and automation. Among the many investors we spoke with at the Growth Stock Conference, the mood was constructive and relatively upbeat, and all were keen to find that new and hidden gem to break out of the Magnificent Seven rut.

We felt the message from the Growth Stock Conference was that the economy was functioning at its basic level—still not quite firing on all cylinders—and not expected to reaccelerate much until at least later this year.

From a macroeconomic perspective, this is a very two-handed economy. We found growth was generally moving forward at a moderate pace, with clear pockets of ongoing weakness (lower-income consumers, small to medium-sized businesses, technology, and industrials) balanced against other areas of strength (middle- and higher-income consumers, healthcare, and government-related). However, the economy, in aggregate, is not currently in recession.

While some companies were excited about many of the positive longer-term structural trends, with the most prominent being artificial intelligence, automation, and energy/water/electrification, they still felt there was some near-term softness that needed to be navigated first and were, therefore, more cautious about activity throughout the remainder of the year.

The U.S. consumer remains resilient, though the lower-income consumer is starting to feel more pressure following the great leveling-up period during COVID-19, which has shown a move toward a renormalization of growth. Within the corporate sector, SMBs remain under intense pressure—where they are arguably in recession, in contrast to the larger companies gaining market share and benefiting from scale, scope, and fixed-rate debt. We heard no instances of major credit issues. Nevertheless, for many companies, budgets were still very tight, expenses were still being scrutinized closely, and the labor market was under increasing pressure.

The Fed is likely pleased with progress on inflation but less so with it settling down to a 2-3% new normal. It would also see evidence of softer growth and weaker employment prospects as being consistent with at least one rate cut later this year, and more to come as it attempts to preempt further economic weakness.

For more information on the research reports published by Richard de Chazal, please contact us or your William Blair representative.