I am not a stock market analyst and don't have much interest in the same. But after coming to US I realized stock market plays a major role in US economy and which in turn is also having impact on Global Economy. The following are a few layman views of this situation. Though I don’t have much interest in Stock Market, almost everyday conversation with colleagues turns to how the stock market behaved today. After sometime I also start observing the stock market. Once I started associating importance to this and everyone’s interest also is turned on to this, I started to gather a few thoughts on the dynamics of stock market and how it impacts my daily thoughts. I am sharing these views as a common man and definitely these are not expert views.
If you think stock
market reflects business situation, then you will think the business is down.
In my opinion, Stock market is the place where company's performance is
rewarded by investors by trading stock. This trading is influenced by lot of
factors. But sometimes it is also influenced by sympathetic trends. The current
trend is a correction of wrong estimates by investors in growth of Internet
technology based companies (dot-com as they are referred to). Lot of companies
setup during last year could not prove themselves resulting those companies
going out of business. This results in correction of the stock market.
Coming from India
where layoffs don't happen so easily whatever may be the condition of the
company, it is difficult to understand effect of layoffs on Indian or for that
matter any other economy. In US layoffs are common as some companies may not be
make realistic forecast of their required manpower and end up having more than
what they need. When they realize that their manpower is excess, they just go
for layoff. In India, layoff happens only when the company is closing down. So
layoff in US is not equivalent of Layoff in India. So analysts in India should
not assume that layoff happening in US is the end of company as it may be in
India. Understanding this and the hype that surrounds these events in US media,
Indian market should not be psyched by these announcements.
So I can't understand
why global economy should be shaken up when one or two companies decide to shed
excessive manpower. These companies may not have had the vision and foresight
to see this coming and a recruitment mistake on behalf of a company should not
create such a big impact.
Once the companies
that are not profitable go out of stock market, the companies that are really
made of stuff will regain their position and stocks will improve. Once
companies look at their technology strategies in the wake of the collapse of
dot-com they will come with a customer oriented, business plans that will make
best use of Internet Technology. Economy will take a turn for the better.
If you are a technical
person who is worried about career, my advice is: Don't worry, technology is
needed for US and also world economy. Internet companies might have gone out of
business but Internet is here to stay. There will be lot of business going
around involved Internet. Knowing the hype involved in US media about stock
market, take the reality as a correction process and believe that the turn
around will happen. Your skills would be needed by companies who will again
start recruiting.
This
downturn in economy is a temporary phenomenon.
Similar to the
Business Process Reengineering (BPR) where the emphasis is on core-business and
change of processes to meet changing needs of society, there will be a need to
adopt a more careful attitude in business in internet technology. Don't get
carried away by technology. Technology does not drive business. Business needs
drive technology. Realign core competencies and evaluate real needs of business
and adopt technology as and when required.
Overall, I would like
to believe that the stock market is a very volatile phenomenon and changes can
happen very suddenly. So current phenomenon will definitely be a temporary one
and soon recovery would happen. It makes sense, not to get worried or carried
away by the trend, but rather focus on business sense and ensure that the
business is going in the right way of satisfying customers’ needs whatever may
be the market trend.
Note:
Again, I would state that these are views of a novice in stock market.