It seems like everyday now that you hear about a new boom or bust in the stock market. But if business owners and individuals do not take the time to look at the overall trends of the market, the macroeconomic policies of major countries and the overall state of the global economy, they might get lost in the daily fluctuations of the market. This will hinder their ability to make sound, long-term strategic decisions for their business and personal lives.
Currently, the global economy is doing quite well, and it has been on a growing pattern for the better part of the past decade. This has been the result of quantitative easing on behalf of the major central banks of the world following the economic meltdown of the 2008. In order to decrease the impacts of the recession, central banks, including the US Federal Reserve, have decrease the interest rates substantially, allowing individuals and businesses to borrow money at low rates to encourage investments into various economic endeavours and the development of different businesses.
More recently, after many years of quantitative easing, central banks around the world, have decided to normalize rates again by increasing interest rates to encourage businesses and individuals to decrease their leverage. One of the major reasons of the meltdown of the economy in 2008 was that people and businesses were over leveraged and, thus, did not have to cashflow to be able to pay their loans, causing a major collapse of the big banks who relied on these consistent payments to continue their operations.
The rising of interest rates usually signal a cool-down in the stock market and, by extension, the economy, as individuals can now make more guaranteed returns in the bond market, shifting demand away from stocks, decreasing their prices. This rise in interest rates, compounded by the increasing level of protectionism that has recently been trending in the global economy, driven primarily by the US trade policy, is increasing the likelihood of an economic downturn in the next few years. This means businesses will need to be far more aware of the economic policies that are unfolding and the potential impact on their businesses as the world enters an era of higher economic uncertainty.
I can tell you firsthand about how valuable accurate and timely information can be when you are going through a change, growth, or some sort of crisis in the business that you run. That is why I focus on the data, trends, and future projections to allow people to see the big picture and make better decisions as a result of this broadened vision.
Eamonn has a B. Eng. (Electrical) from Lakehead University, MBA (Finance) from University of Toronto, and has completed Executive Education at Stanford University Graduate School of Business. He lives in Vancouver, Canada. Follow him on twitter @EamonnPercy.