Volatile mar­ket has chill­ing ef­fect on some small busi­nesses

Belleville News-Democrat (Sunday) - - News - BY JOYCE M. ROSEN­BERG

As the Dow Jones In­dus­trial Av­er­age see­saws by hun­dreds of points a day, Kathy Barnes sees the im­pact of the volatil­ity on home­builders and gen­eral con­trac­tors in the St. Louis area.

Barnes, who helps th­ese small busi­ness own­ers man­age their projects, says her clients are wor­ried that the bull mar­ket that gave cus­tomers the con­fi­dence to do ma­jor work on their homes is at an end. Builders are in- vest­ing in fewer prop­er­ties and con­trac­tors are han­dling smaller-scale ren­o­va­tions.

“Peo­ple are hold­ing back for fear of the worst,” Barnes says.

Although the over­all econ­omy and con­sumer spend­ing have been strong, some small busi­ness own­ers, par­tic­u­larly those who sup­ply bigticket items and ser­vices like home re­mod­el­ing, are feel­ing the ef­fects of volatil­ity in stocks that has per­sisted for much of this year. And some small com­pa­nies seek­ing in­vestors are find­ing re­sis­tance, even from peo­ple who just a few months ago were will­ing to put their money down.

As of Mon­day, the Dow was down nearly 19 per­cent from its record high of 26,828.39 reached Oct. 3 and the Stan­dard & Poor’s 500 In­dex was down nearly 20 per­cent since it peaked at 2,930.75 on Sept. 20, but the gy­ra­tions started back in Jan­uary. In­vestors have been trou­bled by the prospect of slower eco­nomic growth in 2019, and con­cerns in­clud­ing the im­pact of Trump ad­min­is­tra­tion trade tar­iffs on U.S. com­pa­nies.

Gov­ern­ment re­ports on re­tail sales and con­sumer spend­ing show few signs that con­sumers are anx­ious, and while the Con­fer­ence Board’s monthly Con­sumer Con­fi­dence In­dex fell a lit­tle over 2 points to 135.7 in Novem­ber, it was still near its high­est point in 18 years. But many busi­ness own­ers re­mem­ber the dev­as­tat­ing losses stocks suf­fered in 2008 and their im­pact on con­sumer spend­ing.

When con­sumers start feel­ing un­easy or less wealthy, they forgo or post­pone the big dis­cre­tionary items on their bud­gets, says Priya Raghu­bir, a mar­ket­ing pro­fes­sor at New York Uni­ver­sity’s Stern School of Busi­ness.

“Large ex­penses such as home ren­o­va­tions, cars, all of those could be put on hold,” Raghu­bir says.

Barnes’ clients are buy­ing cheaper build­ing ma­te­ri­als be­cause of home­own­ers’ smaller bud­gets.

“I’ve seen a tremen­dous de­cline when it comes to dis­cre­tionary items – cab­i­nets, floor­ing, things that you have some choice about,” Barnes says. She also sees gen­eral con­trac­tors han­dling more of the work them­selves in­stead of us­ing sub­con­trac­tors, a way to pre­serve their profit mar­gins.

Con­tin­u­ing volatil­ity can lead con­sumers to spend less even if they don’t con­sciously feel anx­ious, says Burt Flickinger, man­ag­ing di­rec­tor of Strate­gic Re­source Group, a con­sul­tancy based in New York. But small busi­nesses will no­tice.

“Even if some­one’s a vi­able and suc­cess­ful in­line re­tailer, restau­rant, sa­lon or ser­vice com­pany, their cus­tomer counts can be cut by 25 per­cent or more through no fault of their own,” he says. Flickinger noted that stock mar­ket volatil­ity in the past con­trib­uted to the col­lapse of plans to build big re­tail projects.

Own­ers who re­call un­cer­tain times in the mar­ket are look­ing for signs that their com­pa­nies might be af­fected by cur­rent fluc­tu­a­tions. Mark Ehrhardt, who owns a mov­ing com­pany in New York, says he starts to see his busi­ness slow about six months af­ter the mar­ket be­comes tur­bu­lent.

“Stock mar­ket volatil­ity, and (eco­nomic) down­turns tend to hit the ground level by caus­ing the gen­eral pub­lic to sit on their hands be­fore mak­ing large fi­nan­cial de­ci­sions,” says Ehrhardt, owner of Movers Not Shak­ers. Ehrhardt, a stock bro­ker be­fore he went into mov­ing, is pre­pared to step up his net­work­ing with build­ing man­agers, mort­gage bro­kers and ti­tle com­pa­nies if re­quests from home­own­ers start to slip.

JEFF ROBER­SON AP Kathy Barnes, who helps small home­builders and gen­eral con­trac­tors man­age their projects in the St. Louis area, says clients are wor­ried that the bull mar­ket is at an end.

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