Business Owners Can Learn a Lot from Macroeconomics
Macroeconomics is probably not the first thing on your mind as you sip coffee at the breakfast table and listen to the Today program on Radio 4. Instead, you are probably going through a mental checklist of the day ahead, thinking about meetings you have to attend, clients to call, and emails to respond to. Like many business owners, you may already have fired off a few emails and updated your Outlook calendar. Of course, you have. You’re a busy person and a business doesn’t run itself!
The thing is, though, macroeconomics is more important that you think. Your business doesn’t exist in a vacuum. It is subject to market forces, economic policy implemented by central bank and government, and dozens of other factors outside of your control. If Saudi Arabia increases oil production, it will affect your supply chain, not to mention the cost of fuel for your company vehicles. If the Bank of England raises the base rate, you will soon be paying more interest in business borrowing.
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The Price of Failure
Eight out of ten businesses go to the wall in the first five years. That’s a high price to pay for investing your life savings into an idea you were convinced would work. When a business goes into liquidation, everyone loses: you, your creditors, and your suppliers. It’s not always possible to prevent a business from failing. There are many factors at play, not all of them within your control. A lack of experience, poor decision making from key people within the organisation, and even employee theft, can call contribute to the demise of a promising business.
One thing you do have control over, however, is an understanding of the wider economic conditions your business operates in. The more clued up you are about macroeconomics, the easier it will be to roll with any interest rate hikes or inflationary measures implemented by the Bank of England. Forewarned is forearmed, as they say.
What is Macroeconomics?
Macroeconomics is the study of trends within the economy. These include inflation, interest rates, GDP, price levels, national income, and unemployment figures. If this type of data normally has you switching from Radio 4 to Classic FM, now is a good time to pay attention. Sure, it may not be exciting to anyone other than an economist or forex trader, but studying macroeconomics data will give you a unique insight into future economic policy, which in turn will enable you to make smarter business decisions.
Investors watch macroeconomic data very closely. Serious investors use economic calendars to monitor important announcements from central government, the Bank of England, and other big players. They know that news of an interest rate hike or a suggestion that inflation is creeping up will have a significant effect on the financial markets. They use this data to their advantage, making trades, buying and selling, hoping to cash in on a market rise or fall. Of course, there are no guarantees, but over time an experienced trader learns to read the data and make educated decisions about which way the market will go. Traders can and do get it wrong, but knowledge and experience tend to minimise losses.
The Flow of Data
It’s precisely the flow of data that makes trading so interesting. On its own, raw data is dry. Nobody in their right mind would choose to sit and read through spreadsheets of economic data before breakfast. But, if you push this data through analytical software and use it to map past, current and future trends in the forex and stock markets, you are presented with a picture.
Oanda Global and other trading platforms make it easy for business owners to learn more about macroeconomics and apply their burgeoning knowledge to the business of making money. It’s the perfect pastime for business owners with a passion for learning new skills.
You don’t need Master’s in Financial Analysis to make sense of raw statistics; you just need the right software and a desire to make your savings work that bit harder.
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