Thursday, December 10, 2009

How to Grok the Markets for Business and Investment: 4 Keys to Successful Planning

The markets play a crucial role on the outcome of any project in business strategy or personal investment. For this reason, you need to take into account a raft of factors relating to current trends and future prospects in the real economy as well as the financial forum.

In shaping the path of the marketplace, a clutch of four factors has a major impact regardless of the nature of the niche or the type of project. The driving forces impinge on, and respond to, the domestic market as well as the global economy at large.

To map out a trusty trail through the shifty landscape, a good starting point is to analyze each of the four factors in turn. The next task is to consider the ways in which the driving forces interact with each other and lead to convoluted results.

Among the cast of characters, a couple of principals lie squarely in the financial domain. One of the factors lies in the interest rate set by the central bank. The second element concerns the strength of the currency in the international marketplace.

By contrast, the remaining pair of factors deals with the real economy to a greater or lesser degree. In particular, the level of economic output lies squarely in this camp.

Meanwhile, the inflation rate lies partly in the financial arena due to its dependence on the supply of money pumped out by the central bank. On the other hand, the resulting rate of inflation depends on the price of the products bought and sold in the tangible realm of goods and services.

The money supply is of course a crucial force behind the price level. On the other hand, a mountain of money by itself may have scant impact on the inflation rate if the economy is sluggish or even shrinking.

In the sections to follow, we examine each of the four driving forces in the marketplace. The character of each factor is presented, along with the intricate ways in which they interact.

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