Markets: Keep Calm

Things bought and sold. In a marketplace. Not the same place for everything. Each ‘thing’ has its own market. Some goods are very much like another in the group of goods. Like agricultural markets in corn, soybean, wheat, and so forth. Even in those narrow markets, distinctions are often drawn that separate the market into several submarkets: winter wheat, summer wheat, varietals of wheat, or corn or whatever. Timing has much to do with these markets. So too, the storage of bulk goods. If plentiful stores are maintained, price fluctuation is minimal. If stored goods are small, prices can and do shoot up.

Supply and demand are the rule of such markets. Many factors affect supply and demand. Some are season, some weather related, others are affected by global circumstances far away where wars, tattered economies and weather phenomena reign.

Stock markets may appear as bulk goods, but that is not true. There are manufacturing sectors making vastly different goods that comprise several markets. There are retail stocks and commercial stocks as well. Each has its own variables to deal with. Seasonality has a lot to do with stock pricing, too, as well as political, economic and psychological factors.

The trick to surviving massive market shifts is to know the many factors that affect prices of stocks. Some are as arcane as ‘the bewitching hour’ of September. Others eddy around certain holidays like Christmas and New Year’s. Some are driven by accounting period endings. First quarter, second quarter, third and fourth as well as yearend reporting. All of these things are in play.

Shifting demand from old products to new glittering technology gadgets affects supply and demand as well. Yet comparisons of value – price/earnings, ROI and several others – have a large bearing on pricing.

As an investor or consumer, we need to keep these matters in mind. Use them to calm your shudders at inflation or stock market contractions. What goes down may, and usually does, go up. And vice versa. Stocks have soared in pricing for the past few years. Some say this was not matched by value. Shifts in pricing are bound to happen in such circumstances. Know this and remain calm. If your strategy for investing is for the long term, resist pressures to sell stocks in a falling rate environment.

I once watched my IRA investments – the portfolios I had control of – climb by $1000 values a day. Until a major market shift ended my delight, the losses became big and long standing. That was the recession of 2008/09. During that period, I needed to take action like selling the house and downsize our living styles. These two adjustments were time of life changes, not market driven. Yet, market conditions caused the home value to drop over $100,000 and drove us into bankruptcy. Not in my plan, certainly. But I could have mitigated the losses had I managed my portfolios differently.

Problem was then, and is now for others, we do not know what we do not know. When should I sell some stocks to finance lifestyle shifts? Who is in control of those shifts? Me, or economic trends, or others? Not being a psychic, I went with what I had to do at the time and paid the consequences.

The best advice I can share at this time is remain calm and understand the many factors affecting your investment markets. Housing, auto, consumer inflation, unemployment, stock market pressures and more, are the stuff we need to understand. If you don’t, work with a professional analyst.

Remember the caution: remain calm and make decisions based on facts, not public sentiment.

September 29, 2022

 

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