Government Policies and Business.
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Businesses operate within environments. These are the contextual parameters that influence decision making and the type of strategies a business undertakes in its quest to remain afloat and earn profits. Business environments can be either external or internal. Government and its policies form part of the external environment that easily avails opportunities or threats to the survival of the business. The article titled “Dow closes 160 points higher, posts best week since August as investors monitor stimulus talks” published by the CNBC gives a market analysis of the group of companies within the collective Dow Jones indices (Imbert, 2020). The report highlights a rise in the closing price as at Friday the 9th of October. The prices are the highest recorded by the Dow Jones since July when the coronavirus pandemic kicked in.
The coronavirus pandemic has resulted in massive damage to economies worldwide. Various companies have been forced to shut down with a number having to scale down their operations. This has resulted in unemployment and a massive shrinkage of the economy. In such situation the sock markets also follow the trend with a general decline in prices both in shares and collective indices. In a bid to revamp the economy and keep companies afloat, governments worldwide have been giving stimulus packages to hold the economy during such difficult moments.
A stimulus package is loosely defined as a set of policies put together by governments through its technocrats in order to ensure the survival of a failing economy (Hayes, n.d.). The main areas of focus of stimulus packages are usually on unemployment and spending habits. The government seeks to reduce unemployment while increasing a people’s spending. Keynesians economics argue that recessions are not wired to be self-correcting and thus governments have to ensure they do their best to shoulder the economy from a complete failing. In stimulus packages, governments increase their spending which has the net effect of replacing the decreased spending by the private sector. The amount of money flowing in the economy thus remains at constant in spite of the recession
The articled by CNBC highlights the effect of the continued conversations on the next stimulus package for the Unites States. Besides government policies the article hints at politics and their effect on the economy. Politics make up for another of the external factors. In the initial stages of the stimulus package, there was a minor standstill between the government and the Democrats which was threatening the success and approval of the stimulus package. However there seem to be an amiable position that has given indication of the talks being a success. The market movements are thus a result of the positive sentiment being generated by the probability of a success in the talks.
In the article it is reported that the The Dow Jones Industrial Average closed 161.39 points higher, or 0.6%, at 28,586.90. The S&P 500 gained climbed 0.9% to 3,477.13. The Nasdaq Composite advanced 1.4% to close at 11,579.94 (Imbert, 2020). The article further quotes one Carl Icahn, a billionaire investor who works with Icahn Enterprises, he states that the measures are very effective (Imbert, 2020). Investors are likely to watch the moves that government makes and thus has a compounding effect. When governments spend, investors are likely to also jump into the bandwagon and also spend. The multiplication of government patterns makes it even more critical for not only government to engage but be continuously seen to be engaging. When government announce stimulus packages, companies align their strategies to take advantage f the offers. They cut down on operation that may not receive the packages while focusing on sectors the government is investing in.
References
Hayes, A. (n.d.). Stimulus Package Definition. Investopedia. https://www.investopedia.com/terms/s/stimulus-package.asp
Imbert, F. (2020, October 8). Dow closes 160 points higher, posts best week since August as investors monitor stimulus talks. CNBC. https://www.cnbc.com/2020/10/08/stock-market-futures-open-to-close-news.html