The New York Stock Exchange has not seen the kind of volatility its currently facing since the end of July. The DOW closed on Friday at 16659, finishing down 4 percent from its recent high point of 17279 on Sept. 19.

Many factors may have caused the slump, but stagnant economies around the world are worrying American investors and providing disconcerting news about emerging markets like India and China. But business leaders in the U.S. don’t seem to mind, and plans to expand globally continue in spite of the outlook for growth internationally growing gloomier each day. It’s risky and overly ambitious.

Performance around the world has been weaker than economists have hoped. According to a Friday report by The Street, Germany is nearing another recession with exports falling and unemployment likely to rise next year. As one of the stronger economic players in the Eurozone, another collapse there could cause the rest of Europe to “fear the wurst” as put by the Economist.

China is also showing signs of a sharp slowdown, said Merryn Webb of the Financial Times on Friday. Long years of over-investment left housing and commercial enterprises vacant, leaving a massive credit bubble ready to burst from $13 trillion worth of public spending from the government since the onset of the 2008 financial crisis.

The rest of the world is no better. Japan is still feeling the effects from the financial crash of the 1980s. India is very much up in the air for now with the recent election of Narendra Modi as prime minister. The Economist called growth in Russia and Brazil “stagnant at best.”

The United States at this point is very much a bright spot in the world. Unemployment has fallen below six percent. Growth is projected at 4.2 percent for the third quarter. The average length of workweek in the manufacturing industry ticked up to its highest in years, at 34.6 hours. It was at 34.4 two years ago, according to statista.com.

The encouraging news in the United States economy is dampened by discouraging news elsewhere. Falling stocks are a clear indicator of that fact. Business leaders must take the global trends into account when making decisions on expansion, as ambitions have grown perhaps too high for the world to handle just yet.

A Sept. 15 report from The Street suggested that slowing retail sales in China, from 13.2 percent to 12.8 percent growth, are raising red flags for American enterprises looking to expand. Shares of Starbucks have fallen 1.2 percent in the past month amid China worries. Gap plans to open 35 stores in China over the next year. Abercrombie & Fitch plans to open “hundreds.”

It’s awfully optimistic, and generally misguided. It’s the product of dreams for a global department, and not based on prudent financial decision-making.
Salesforce, a cloud computing company, is planning to open data centers across Europe in 2015. Beloved video streaming company Netflix will begin more robust operations there as well, focusing on France and Germany. The list goes on.

There may well be enough demand internationally for these companies to succeed in new territories. A slumping economy doesn’t mean Germans won’t be interested in Netflix or Chinese shoppers won’t be wearing Abercrombie. But financial reports are showing consistent red flags about the growth prospects outside of American borders. The idea of global expansion is enticing, but it isn’t the right decision right now.

A homegrown American recovery does not indicate smooth sailing abroad, and the success of new ventures in Europe and Asia will be highly dependent on the success of those respective economies. The markets tell us that success isn’t likely — and corporations should listen.

Phil Kramer is a sophomore finance major. His column appears weekly. He can be reached at [email protected].

Published on October 13, 2014 at 12:04 am