Only companies that reinvest in their businesses will survive a deflationary trend that’s appearing across the globe. Investing in your own business seems like an obvious in any economic situation, but since the 2008 crisis, corporations haven’t been. Instead, they’ve been hoarding capital or giving it to shareholders in the form of stock buybacks.

In September of last year, the S&P 500 companies held more than $1.3 trillion dollars in cash on their balance sheets, according to Factset. And in early February, Bloomberg reported that U.S. banks sat on a $2 trillion pile of cash.

Stats also show that business spending is dropping. Corporations have been making headlines on stock buybacks, which has been well-received by investors, but investors want more spending aimed at growth, according to a recent survey.

The survey, conducted in February by broker Convergex, found 72% of investors said “too much cash” or “way too much cash” is currently on the books. While 61% named capital spending, incremental hiring or acquisitions as their preferred use of excess cash.  And 39% chose dividends or buybacks, the study found.

And why is spending on growth so important? Firms that don’t spend tend to disappear in times like these. Today, even though the world is steadily moving toward a recovery since the 2008 financial crisis, there are a number of deflationary forces that are putting a drag on growth, which will make it difficult for companies that lose market share or that must cut prices.

Deflationary forces such as increasing taxes or lower wages, for example, hinder consumer’s spending and force companies to compete ever harder for a diminishing share of customers. Only those that have invested to develop the best products will survive.

During the Great Depression, the most extreme case, firms that hoarded their capital couldn’t better their businesses in time when the economy finally started to grow strongly. Those that invested survived and thrived.

While these deflationary forces won’t pull the world back into a full-blown depression—at least not so yet—they’re strong enough to make the recovery choppy and to make us want to only buy companies fixated on self-improvement.  

That’s why when we designed Global Income Edge’s portfolios, among other factors we wanted businesses that are investing in future growth, such as utilities that have major power plant developments in their pipeline, or telecoms that are expanding their services worldwide, as well as healthcare companies that are developing new drugs.

So Global Income Edge has been ahead of the curve in terms of this new trend of demanding that companies are investing in their business.

Some of those deflationary forces are;

Poor Central Bank Policies: Stimulus programs are blunt instruments that prop up stock prices, but often don’t stimulate the real economy.

Weak Labor Force Participation: The labor force participation rate is at its lowest in decades in the U.S. and many parts around the world. And many of the jobs that have been created are lower paying.

Growing Income Inequality: Central bank stimulus programs prop up stock and bond prices, which disproportionately help the rich. Fact: Income inequality leads to lower growth.

Crushing Government Debt: Many governments around the world have debt in excess of 100% of GDP. In the future their citizens will be taxed to pay the debt burden, and so have lower disposable incomes.   

The Tax Man Cometh: Government Debt Levels Are a Drag on Future Growth

Source: University of Texas

Given these problems, we work particular hard to find those global titans that can endure the potential decline in global growth—those that build their companies of brick to keep the deflation wolf at bay.