Stock market performance
Stock markets have experienced considerable volatility over the last 18 months, and it has been a turbulent decade for financial markets. Recent problems in the global economy saw market prices slump, but they have since rebounded to recover some of their former value. Most forecasts are cautiously optimistic for 2010, but there is a large degree of uncertainty. Although an implication of the current credit crunch and the economic downturn, stock market performance does not necessarily reflect the wider economic situation, as it is mostly influenced by confidence.
What are the implications?
- The recovery in stock market prices has allowed some financial institutions and investment banks to make large profits in 2010.
- Individual savings and investments relying on the stock market are affected increasing levels of personal debt and slowing consumer spending.
- Prices remain significantly below what they were a decade ago, meaning private pensions and pension funds that rely on long-term growth have suffered.
- Organisations offering final salary pensions will suffer as people retire and they have to make up the shortfall in pensions.
- Many trusts and grant foundations funds are based on stock-market investment, so money available will vacillate with the changing market.
- Consumer confidence is affected; paralleling rises and falls in the stock market.
- Opportunities for investment may still exist for those with some spare capital.
Moving forward
Opportunities exist in a falling stock market for investment. Does your organisation have any spare capital that it can invest? How will you find out where it is safe to invest?
A falling stock market may change patterns of volunteering. If you use employee volunteering how will you fill the gap? Are there ways you can encourage newly redundant people to volunteer?
Final salary pensions are likely to be affected by a falling stock market. How will your organisation fill the shortfall? Do you need to look at ways of raising extra funds? Might you need to diversify your income to ensure protection?
Faced with mounting criticism of their profits and bonuses, investment banks may be keen to find new ways to demonstrate social value. How can you harness this to benefit your organisation?
Want to know more?
A turbulent decade for the FTSE
Published by: The Guardian
Date: December 2009
What is it? An interactive guide showing key events and changes in stock market prices over the last decade.
How useful is this? Provides a really good overview of the events that have caused stock market volatility, in a simple to follow chart.
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How falling stock markets affect you
Published by: BBC news
Date:2003
Format:Web
What is it? A summary of how falling stock markets affect individuals.
How useful is this? Useful for those wanting to know more about the implications for individuals of falls in the stock market. It sums up arguments that some may use as to why the stock market is irrelevant to them, and illustrates how this is not the case.
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Determinants of Stock Market Volatility and Risk Premia
Published by: Stanford University
Date: 2003
Format: PDF
What is it? An academic paper discussing what causes volatility in the markets.
How useful is this? Once you get over the academic style, this paper offers an interesting discussion into the causes of stock market volatility, using economic forecasting tools to predict outcomes. Useful for those who want to know more about why markets change rather than the effects of these changes.
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Discuss
How will this affect your organisation? Have you considered it during your strategic planning? Can you share any interesting relevant links?
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