The world’s capital markets have experienced a great degree of volatility in recent years, with disruptions due to the COVID-19 pandemic, record-setting daily percentage losses and gains in the Dow and rampant inflation. What happens in the financial markets transcends Wall Street. It affects workers with retirement savings in a 401(k), global corporations, small businesses on Main Street and the pocketbooks and livelihoods of people of all types.
The stock market impacts the bond market, the price of commodities like oil and the value of national currencies and cryptocurrencies. In turn, each of these impacts investment decisions individuals make with stocks, funds, certificates of deposit (CDs), derivatives and annuities, among other instruments. Whether one understands the financial markets or not, they deeply impact daily life. Gaining fluency in financial market applications will pay dividends both professionally and personally.
Students in the online Master of Business Administration (MBA) General program at the University of South Carolina Aiken explore financial (capital) market concepts throughout the curriculum. Studying financial management can open the door to numerous careers in business. As an introduction, the following are some of the largest markets for trading securities.
The stock market consists of international and domestic exchanges on which public corporations source capital to invest in their businesses. To accomplish this, they sell shares of ownership — stocks — to investors through brokerages like Charles Schwab and E*TRADE. The emergence of fintech democratized aspects of the stock market, allowing everyday people access to investments large and small.
Public companies communicate with the investment community in a variety of ways and publish quarterly earnings forecasts. When they outperform these forecasts, investors reap the rewards through rising stock prices and dividends. Through stock market investments in individual stocks, mutual funds and exchange-traded funds, the fortunes of individuals are tied to these public companies. When the market rises, it’s a bull market, which benefits many stakeholders directly and indirectly.
The bond market is where organizations of all types, from municipalities to national governments to public companies, go to secure big loans. Access to large sums of capital is known as liquidity, which keeps the economy going. Bond types include treasury, municipal and corporate. Bond and stock prices often move in opposite directions, so investors diversify their portfolios between them.
The money market provides access to short-term lending, from several days to a year. Investors are issued banker’s acceptances, repurchase agreements, CDs and other forms of securities. These are more conservative than stocks or bonds, offering relatively safe investment options, albeit with lower returns and higher liquidity because of their short maturities.
The derivatives market presents a more exotic form of investing based on strategies that professional, skilled investors understand. The issued contracts are known as derivatives, as an investor derives value from their underlying assets. Examples include forwards, futures, options and swaps.
Organizations use the commodities market to offset future risk by locking in known prices today on things like oil, agricultural products and precious metals. Because of its use in transportation, industry and energy, oil is the most important commodity in the global and U.S. economies. Coal has also been a main commodity for its value as an energy source, but as a significant recognized pollutant, it has faded in importance.
As a form of decentralized digital currency, cryptocurrency is a relatively new development. Cryptocurrencies can be traded in the hopes they will rise or fall in a way beneficial to the investor. The crypto market can be extremely volatile, offering the potential of both high reward and high risk. As with other forms of investment, the development of fintech enabled widespread access to cryptocurrency markets.
If the capital markets fascinate you, earning a General MBA from the University of South Carolina Aiken could provide a path to expertise in your particular areas of interest and a limitless range of rewarding career options.
Learn more about the University of South Carolina Aiken online General MBA program.