There may be some reason for concern, believes ER Wolf, a business technology expert and founder and CEO of Elify. “The stock market plunge negatively impacts the mindset of the entire country and can make people more cautious about spending money,” he says.
David Weliver, publisher of MoneyUnder30.com, agrees. “I think market volatility shakes consumer confidence, which can cause people to spend less on larger purchases or put them off altogether. Although the stock market shouldn’t have the same impact as rising unemployment or a prolonged recession and it shouldn’t affect a business’s ability to grow in the long run, when people see their retirement balances going down, they may tighten their belts in the short term.”
There may be morale issues with employees if they’re invested in the company retirement plan, agrees Andy Martin, president of 7Twelve Advisors, LLC, which creates and manages diversified investment products for the public markets, and a registered securities principal with Girard Securities, Inc. “It’s important to keep in mind that though we have come out of the worst week beginning for the market in history, the market is only down 10.4 percent from its May 19, 2015, peak. A 20 percent drop without a corresponding increase is considered a ‘correction,’ and even a correction is not a ‘crash.’”
Upside to Stock Market Fluctuations
In a prolonged down market, businesses might have a unique opportunity to woo angel investors who are looking for investment opportunities outside of Wall Street, believes Weliver. “On a lighter note, a business might seize an opportunity for a clever promotion, such as giving customers a ‘consolation’ discount on days or weeks the stock market drops,” he explains.
Whenever there is change, there may also be opportunity, adds Joshua Mellberg, founder and CEO of J.D. Mellberg Financial. “Opportunities can arise when there is a need for a product or service and there was no need before,” Mellberg says. “Smart small-business owners will be looking for the opportunities arising out of those new needs.”
Stock market troubles can open up avenues for people needing extra income, adds Wolf. “Oftentimes after major stock market adjustments, we see an increase in side business startups. This country was built on small businesses growing into large businesses. When there is a crash, large companies may be impacted, which opens the opportunity for small businesses to come in with new goods and services, so it’s important to focus on where the opportunities are and not on what was lost.”
Patience Is a Virtue
Whether you’re managing your own investments or working on your business strategy, it can be critical to take a long-term view. “The stock market has wild swings from month to month and even year to year, but it has grown consistently over decades,” Weliver says. “For the most part, changing an otherwise sound strategy based on what the stock market’s doing doesn’t make sense. The exception might be business owners planning to retire in the next couple of years—in that case they might choose to delay retirement until the market recovers a bit.”
While Martin doesn’t advise small-business owners to give investment advice to employees, he does suggest using the stock market fluctuations as teaching moments.
“Remind employees about the benefits of dollar cost averaging—as prices drop they have the opportunity to buy more shares,” Martin says. “And for those workers who still have 20 years or so left in the workforce, the good news is that there has never been a 20-year period when an investor would have lost money in a diverse portfolio of U.S. Large Cap stocks—such as the Dow Jones Industrial Average or S&P 500. Investors who diversify and are patient outperform investors who are temperamental. Patience beats impatience every time.”
The information contained in this article is for generalized informational and educational purposes only and is not designed to substitute for, or replace, a professional opinion about any particular business or situation or judgment about the risks or appropriateness of any financial or business strategy or approach for any specific business or situation. THIS ARTICLE IS NOT A SUBSTITUTE FOR PROFESSIONAL ADVICE. The views and opinions expressed in authored articles on OPEN Forum represent the opinion of their author and do not necessarily represent the views, opinions and/or judgments of American Express Company or any of its affiliates, subsidiaries or divisions (including, without limitation, American Express OPEN). American Express makes no representation as to, and is not responsible for, the accuracy, timeliness, completeness or reliability of any opinion, advice or statement made in this article.
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