Business confidence at 21-year low

Business confidence has hit a new low, according to a report on the BBC (http://www.bbc.co.uk/news/business-21387493) based on a survey by accountancy firm BDO. Confidence was at its lowest for 21 years, the survey said, based as it is on optimism in business performance and the economy over the next six months.

This is in spite of improving labour market figures and a stock market that peaked recently at well over 6,300.

It seems that the survey's responses reflect the continuing lack of growth in the UK economy and any signs that it has turned the corner.

While a triple-dip recession remains a possibility, the survey's employment index was up in January, as was optimism within the manufacturing sector.

As a business owner, I have seen a fall in enquiries as a reluctance to spend money persists. With that trend, the spiral is downward until people and businesses decide to spend again. It appears that upward turn is still some way off.

Is stock market rise reflected in increased business?

If the stock market is an indicator of how well the economy is doing (and I realise it is only ONE indicator), then the last quarter's FTSE 100 index resurgence tells us that the economy is doing very well. Quarter 3 2009 saw the FTSE 100 rise by 21 per cent - a record quarterly rise.

The previous best was in quarter 4 of 2009, when a 15 per cent rise was fuelled by the dotcom boom. This time round, the stocks that have fared the best have come from financial and mining stocks. (Finance stocks undoubtedly recovering from terrible previous falls.)

The single best performer, however, was British Airways, which rose by 77.8 per cent.

Does the rise signify a bull market? Or is it done for now?

Allan Collins, of brokers Redmayne Bentley, said: "A correction is overdue, but this market deson't look as if it wants to go down. Looking forward to next year, we're not going to be raging bull."

For my own businesses, a 21 per cent stock market rise has not meant a similar increase in revenue, profit or enquiries.

However, the stock market usually reacts ahead of business market changes. I would hope it translates into increased business henceforth.

And I can report that enquiries have been up this week!

How we forget - the stock market cycle will go on

I've been reading about the US stock market crash of 1929 in John Kenneth Galbraith's "The Great Crash 1929", and it is remarkable how many of the phrases used in the book (written in the 1950s) have been heard over the last couple of years when talking about our own stock market fall.

And we read on the BBC website a headline that says: "Bank crisis lessons 'not learned' ".

It seems the lessons are never learned.

In keeping with pace of modern life, we are quicker to forget than we ever used to be. In the arena of finance and the stock market, people are always looking to make money, and an over-regulated system prevents that from happening. Therefore, whatever regulations are put in place following a crash, they will eventually be eroded so that money can be made again.

The facts are these:
- You can never get rid of 'boom and bust'.
- What goes up can come down.
- The fall will always be faster than the rise.
- Long term, and in general (i.e. not every specific stock) values WILL go up.

If you invest in the stock market - or property - you need to go in with your eyes open. We've seen it go down, and we're seeing it go back up again.

The cycle will continue.

Note: No part of this article constitutes financial advice.