Scott Simpson is president and CEO of BlueTarp

Donald Trump’s win in the U.S. presidential election introduces a significant amount of uncertainty into the future state of the economy--just like any election. It’s paradoxical, but true: The odds of accelerated GDP growth and risk of recession both increased, and players in building supply need to be prepared for both. Let’s unpack what we think we know so far.

The Case for Accelerated Growth
Trump’s pledge for infrastructure spending, loosened regulatory scrutiny, and tax cuts represent potential accelerants to the economy in the medium run.

With the GOP controlling the White House and both houses of Congress, there is a higher probability that those initiatives will be enacted. It’s important to note that higher probability does not mean certainty. The president will need to convince his party to implement the same kind of fiscal stimulus that they spent the last eight years resisting from President Obama. The increase in the deficit caused by a fiscal stimulus and a large tax cut will be fiercely resisted by small-government fiscal conservatives in his party.

The Case for Recession
Trump is ascending into office with no comparable political experience and resistance to certain issues. It’s too early to say if these attributes will be a destabilizing factor in geopolitical events.

Several of Trump’s stated campaign promises could roil markets and create disruption. Deporting potentially millions of illegal immigrants, instilling protectionist tariffs, and withdrawing from the Trans-Pacific Partnership and the North American Free Trade Agreement would represent seismic shifts in how the United States economically engages with the world.

Overall, no one knows what to expect, and that creates uncertainty as it pertains to economic decisions. Uncertainty has a way of paralyzing (or postponing) investment decisions that have real economic consequences. An individual’s decision to “wait until things shake out”--which seems like a very rational initial response--can create a significant pullback in consumer and investment spending when aggregated across 125 million U.S. households.

Be Ready to Strike ... or to Respond
So what does this mean for dealers in building supply? Be prepared for how to exploit boom times as well as strengthen your resilience to recession.

Ample liquidity is one common element to both scenarios. You’ll want healthy cash flow so you can invest in people, product, or whatever you need to gain share in a growing economy. It’s also what you’ll need if things are headed in the wrong direction. Tip: Make sure you have as much open to buy on your bank line of credit as you can. If your bank is willing to raise your line, take it. They won’t be so open when times turn tough.

Be thoughtful on how you manage risk of any type. Think about or simulate how your business can handle a shock: loss of a major customer, defection of sales reps, spike in commodity prices, large dispute or credit loss, trip of a bank covenant, etc. The exercise will help you understand where your business might be exposed and also steps you can take to lower the probability that those things happen or how bad they would hurt if they did. Whether in good times or bad, that’s time and energy well spent.

Specific to managing your customers, double down on the healthy ones and stay tight on weaker ones. There is a tendency to get too loose or tight across-the-board in response to economic cycles when the best course of action is to not have a one-size-fits-all credit and collections approach. Doubling a credit line on a strong builder who is growing is one thing. Raising the credit line on a weaker builder who wouldn’t need it if they paid on time is another.

Stay Informed
Finally, significantly raise your level of monitoring of financial, political, and world events. If you are not a regular, daily reader of multiple financial and news outlets, you need to be.

As for me, I’ll be paying keen attention to how consumer confidence and the markets react over the next three, six, and 12 months as the president’s impact starts to become clearer. Both are fickle friends and sensitive to herd mentality. “Irrational exuberance” and “running for cover” are two sides of the same coin. I’m hoping for smooth sailing, but preparing as we speak for something worse.