Are you a bit curious what these three things have in common? Today, we are going to discuss current trends and cycles of various markets.
You probably know someone who is either selling, or hoping to buy, a house right now. Home prices have exploded due to super-low interest rates, high buyer demand, and a historically low supply of homes for sale on the market. It is a fantastic time to be selling, and a really challenging time to be buying. At some point, this dynamic will change.
In a similar fashion, the used vehicle market has risen to unprecedented levels. Due to the disrupted supply chain caused by the pandemic shut-downs, new vehicles are in very short supply. Getting the exact new vehicle of your choice is almost impossible. As a result, used car and truck prices have gone through the roof. In some cases, several-year-old vehicles are selling for nearly the same price as when they were brand new. Like housing, this is a cycle or trend, that will inevitably change.
At the same time, the stock markets have continued their upward tear and new “all-time-highs” are being set on a regular basis. Government-pumped stimulus money, pent-up demand for goods and services, and a hopeful attitude that the pandemic is past, have seemed to fuel this spurt in the markets. As we have often stated in the past, investment markets are cyclical; they always have been, and always will be. Does this mean we should fear the current markets? Absolutely not! However, it is a good time to remind ourselves of common sense decision-making, and time-tested principles that have always been important.
- Spend less than you earn.
- Have adequate cash reserves (up to 6 months of living expenses).
- Set money aside (removed from market risk) that will be needed for planned expenses in the next several years.
- Have money positioned in a conservative fashion if you are using it for current income.
- Consider utilizing a “Dollar-Cost-Average” strategy to gradually and systematically add large sums that you currently have available to be invested.
- Keep your long-term money fully invested to capture the returns throughout the market cycles. This is how you can “out-pace” inflation.
Trends and market cycles come and go. Wisdom, common sense, and time-tested principles are rock-solid and unchanging. We stand ready to help you navigate these various market cycles. Let us know how we can best serve you!