It has been a week of hell in financial markets: S&P downgrades US Treasuries, the Dow plunges below 11,000, stock markets all over the world give up trillions of dollars in value. Riots from the UK to Israel. Safe haven investments such as the Swiss franc and gold reach new highs … Where does this leave the average SME (small or medium-sized enterprise) owner? Consider the following five likely outcomes:

1. Revenue stagnation

What has happened in the past week or two is a sea change in the outlook of financial markets. Whereas two weeks ago financial markets seemed to reflect a cautious optimism that a slow global recovery was under way, markets now reflect a scenario of stagnation, in some countries potentially even a double dip recession. So unless you are in one of those fortunate niches that can’t keep up with demand (for example the entire supply chain of Boeing and Airbus is struggling to keep up with a five year backlog on aircraft orders), your revenue outlook may be considerably less optimistic today than two weeks ago.

2. Ongoing volatility

The best prognosis is that markets will continue to lurch from crisis to crisis. There is no credible solution yet in place for the debt problems of the peripheral European economies. The US will lurch between between slamming on the fiscal brakes (the Tea Party’s desire to reduce the size of government spending) and stimulus, in the form of new forms of quantitative easing and job creation programs – each with its own set of problems. Even China teeters on the edge of a contraction, according to some market watchers.

3. Liquidity will be at a premium

Companies will likely stretch their payables even more, cash will be at even more of a premium. Liquidity may become an even more important source of competitive advantage.

4. It may become more difficult to raise financing

Banks may become even more cautious in lending. Private equity will likely become even more cautious in cherry picking quality deals at more conservative valuations. M&A markets may become even more of a buyers’ market. Yet for business owners, it may be important to seek financing to ensure liquidity, even survival, in the potentially lean months ahead.

5. A shift in asset classes?

Many market observers are saying that now is a good time to buy equities, taking advantage of current low valuations. They may be right. But one must also ask the question: Is there a long-term shift among asset classes here? Just as the decade leading up to 2008 was a decade of soaring equity values and above-historical returns, the subsequent decade may go down in financial history as a decade of equity price stagnation, horizontal movement and volatility. Since 2008, an investment in commodities (e.g. gold) would have performed better than most equity portfolios.

The two major financial markets in the world – the US and Europe – each have their own sources of instability moving forward:

• The US highlighted its own political disfunctionality in not being able to resolve an artificial, self-inflicted, problem – namely raising the debt limit – until the eleventh hour. This does not bode well for creating the political consensus to solve the real (and infinitely more difficult!) issue, diminishing the vast imbalance between projected revenues and expenditures.

• Europe continues to suffer from the lack of centralized institutions, (giving it, for example, the ability to levy taxes, drive expenditures and issue bonds at the European level), an advantage that the United States enjoys vis-à-vis Europe. While the consensus for further integration does not (at least yet) exist, the lack of such centralized institutions makes it far more difficult for Europe to respond credibly to financial crises.

Working through both of the last two issues is optimistically a decade-long agenda for both Europe and the US. In the meantime, markets may lurch from crisis to crisis, which will either help create the incentive for political consensus to resolve the above issues, failing both the US and Europe will see huge difficulties ahead. Scenarios include the European Union losing members, or the US dollar losing its status as reserve currency.

Given the developments of the past week in financial markets, the worst approach by business owners would be to take the ostrich approach: to stick one’s head in the sand and pretend that nothing has changed. These are momentous changes. How does this change your business?