We could describe 2018's emerging market trends with one word: volatile. This level of unpredictability was mostly caused by a stock market influenced heavily by global trade skirmishes and rising interest rates.
Business owners seeking profit in 2019 should pay close attention to a market that's still working to correct itself. Here's what you can do to help you stay on the winning side of these emerging market trends.
1. An Overall Sluggish Economy
While in the United Kingdom recently, I noted the level of chaos surrounding the still-unresolved Brexit situation. Brexit is contributing to the global bear market, or a market in which prices are falling. But, that doesn't mean you have to wait for a conclusion to make critical financial decisions. If you're planning on investing, be conservative. You might be advised to sell stock, but if this isn't part of your long-term plans, resist. Sales of non-mandatory items tend to decrease in bear markets because customers spend less. If your cash flow dips below what's acceptable, further develop your product or service or tweak its messaging so it's considered a necessity—even in a sluggish market.
2. Evolving Trade Policies
The U.S. is in an ongoing trade dispute with China, but that's not the only issue. The government is issuing new tariffs all the time, and as of late, they've been particularly affecting goods imported from the European Union, Mexico and Canada. Depending on your business, new tariffs may result in increased costs to your business and diminished cash flow. Work smarter with trade policy by acknowledging its impact immediately and adjusting your product and service pricing to cover some of the losses.
2. High U.S. Dollar
The U.S. dollar's strength is a market trend that gained momentum in 2018, and many financial experts predict the dollar will go even higher, possibly appreciating so it's almost equal to the Euro. When the dollar is stronger than usual, it means that your exported goods and services are more expensive than their competition from other countries. Therefore, it's essential to be agile with your pricing to ensure your customers don't leave in search of better deals.
3. Credit Bear Market
A bear market for credit may have likely already begun, and this market trend is apt to continue over the next year as high-yield bonds and loans underperform, and downgrades and defaults follow. Why does this matter? A credit bear market makes it harder for businesses to obtain loans from other banks or other financiers, and therefore harder to expand. Since the risk premium (the amount you pay over the risk-free rate) is higher, your interest rates will also be higher. Another consequence of a credit bear market? Consumer lending is more difficult, so your customers might cut back on non-critical spending.
Business owners seeking profit in 2019 should pay close attention to a market that's still working to correct itself.
4. Rising Oil Prices
CNBC's mid-February analysis claimed that oil prices are approaching breakout levels. Brent crude oil topped $66 a barrel (a rise of nearly seven percent), while U.S. crude oil rose to nearly $56 a barrel (a rise of over two percent). Oil prices affect your business because they can either increase or decrease your transportation and shipping costs. Use this market trend to your advantage by re-evaluating your supply chain strategy and your level of oil dependency. This is a good time, for example, to trial a more sustainable way of getting your goods from one place to another.
5. Increasing Inflation
Kiplinger predicted that the 2019 inflation rate will be around 2.2. percent, up from 1.9 percent at the end of last year. Rising inflation often results in the demand for higher wages, which directly impacts your profit margin. Be competitive with employee compensation, and try to pass along wage increases to your customers via price increases. Just don't do anything too drastic, or the other market trends may cause your clients to stop buying.
6. Indian and Chinese Growth
More than half of global growth over the next decade is likely to come from India and China, meaning that the Asia-Pacific region will become increasingly important. U.S. business owners may take for granted that New York is the center of international economic activity, but this is changing rapidly. Businesses in Asia or with close ties to Asia may reap greater benefits than those who are further away. Even if you've only operated domestically to date, you can work smarter with this market trend by launching or expanding your relationships and partnerships in Asia.
Some 2018 market trends still apply, but the global economic outlook is constantly shifting. When it comes to working smarter with market trends like bear markets, evolving trade policies, a high U.S. dollar, rising oil prices and inflation rates and Chinese and Indian growth, awareness and attention are your greatest weapons.
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