The stock market affects consumer spending in many ways. The price of corporate shares are an indication of financial performance. Furthermore, if companies are not hiring, then consumers will not spend. There are many ways the stock market affects consumer spending; stock market trends influence consumer confidence, projections about the economy and investment decision making.
Confidence
Confidence is key for a healthy market. When there is a recession, as long as the market is stable consumers will continue to spend. In order to boost overall consumption one of two things must happen; hiring or better alternatives. Hiring creates more income for individuals as well as free positions from other companies. When better alternatives are presented consumers fill their needs at a much cheaper price. There is no sure way to gauge how the market will directly affect consumer confidence, but it does affect investor confidence. Confidence can also be placed in overseas markets such as Hong Kong which often has stable markets. Fixation on one solution can be deadly, so explore all options at minimal costs.
Projections
When the market is healthy, relatively accurate projections are made since consumers are more likely to spend. Companies meeting goals are an indication of consumer spending. Most times, when stock prices are in decline such as in a “bear market”, companies are usually cautious about hiring. Projections accurately depict how companies focus on needs. Energy, financial services and real estate are needs of the consumer market. Although real estate is not in its greatest form for the seller, if you have the right mindset you can rezone your property. Projections should not be made without properly supported evidence and multiple alternatives.
Investing
Investing is extremely simple, but so many are afraid to invest. The stock market has nothing to do with investing in knowledge. A good rule of thumb is to gauge how the stocks fluctuate during bad times. The savvy consumer will take advantage of rock bottom prices. For example, buying Company A stocks at $0.01 a share and deciding to pass on Company B shares because they cost $1.00 share reflects savvy because this decision demonstrates the consumer understands return on investment. In order to double money for Company B the shares will have to go to $2.00, but for Company A the shares reaching $2.00 is an astronomical percent increase. Investing can be executed any where in the world via brokerage services such as Sharebuilder.
Alternatives
There are many alternatives consumers look to when the economy is in a recession. Consumer confidence easily rises when quality needs are met. Moreover, when deciding to saddle up and spend, this behavior is often indicative of a trend that many people will follow. Sometimes, in order for things to pick up, consumers must not rely on companies. To control future finances, focus on discretionary income and on eliminating debt. Stock market analysis comes down to the eye of the investor.
When looking to the stock market to gauge consumer spending, do not get discouraged. There are many companies willing to slash prices. Always seek professional help. Good luck!