As a small or medium-sized business, you probably think stocks and shares aren’t important. Talk of things like indices and the Dow Jones are something reserved for the big boys, right? Wrong. Even if your company isn’t in a position to sell shares, the movement of the financial markets can affect your business. You only have to look at the Dow Jones to see how its ups and downs can have an impact, not just on small and medium-sized businesses, but entire economies.
In 1896, when Charles Dow decided to track the value of the largest companies in America, he couldn’t have anticipated the impact his work would have on the world. His original goal was to look at the average index of 12 companies that represented the best of American industry. Although the likes of the American Tobacco Company have since gone out of business, the original index laid down a marker for what was to come. Fast-forward to today and the Dow Jones Industrial Average (DJIA) tracks the fortunes of 30 companies.
Dow Jones and the Economy Are Inseparable
These companies represent a cross-section of American industry and, in turn, are responsible for trillions of dollars of business. When you look at the list of 30 Dow Jones companies today, you can see why this index is so important. If the stock value of companies like Boeing, Coco-Cola, and Chevron are strong, it’s a sign that the economy is looking quite robust. Indeed, when people are spending money on air travel, fuel, and food, times are good. When the value of these companies takes a hit, it often means the economy is struggling and people are spending less.
Of course, economic shifts are far more nuanced than this. However, the fluctuations of the Dow Jones are an effective way to judge the health of an economy. As a business owner, that’s important. When an economy is struggling, you’ll need to employ slightly different strategies compared to when it’s booming. For example, when the markets are bullish, investors and consumers are willing to spend more. If you’re a small business looking to become a medium-sized operation, positive movements for the Dow Jones could be a great time to seek out further investment.
Learn to Ebb and Flow with the Markets
Conversely, if times are tough, it might be time to scale back or, perhaps, innovate. When the markets are bearish, and stocks are plummeting, the price of goods and services can be affected. So, if your business relies on transport and shipping, a rough time for Chevron could mean higher fuel prices. This, in turn, hurts your bottom-line. Therefore, it pays to track the Dow Jones and other financial markets like the S&P.
Even if the fortunes of major companies don’t have a direct impact on your business, they do have an impact. When the big boys are hurting, an economy is hurting. This could, in turn, hurt your business. However, if you can keep an eye on how the markets are moving and learn to react, you stand a much better chance of thriving, whichever way things are flowing. Stocks might not be important to the daily running of your business, but they’re definitely an important part of its future.
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