When attempting to analyze any type of market behavior, it is helpful to remember that markets behave irrationally. There never is just one factor or a fully definitive answer as to why markets behave the way that they do, in good times or in bad. Conventional wisdom indicates, however, that cyclical markets will seek an equilibrium point.
Recent examples illustrate this point. The last time the stock market values dropped significantly was after an extended period of unprecedented increases in stock prices. At the time of the increases, the market performance far outpaced the supporting economic data so when values began decreasing it was viewed, by many experts, as a time of correction. The housing market also reflects this cycle. We experienced extreme and largely unexplainable home value appreciation for several years prior to a few years of depreciation. In many markets, housing prices have started to increase again as buyers create new demand. Once that demand begins to outpace the supply of homes that has built up in recent years, prices will increase to an even greater extent.
While the extent of these cycles is yet to be determined, it is very reasonable to expect that a sense of normalcy will return to both the stock market and the housing market. It also helps to remember that the best time to buy and invest is typically when the price is low so if you have the ability to do so, it is a good time to look at your options and make some wise investments, whether they be in real estate or stocks.
Scott Arney has served as CEO of Chicago Patrolmen's Federal Credit Union (CPFCU) for the past 14 years. Headquartered in Chicago, IL, CPFCU is a full-service financial institution which has been serving the financial needs of Police Officers and their families since 1938.CPFCU recently opened the National Police Credit Union, a marketing division of CPFCU which is the first and only full-service financial institution created solely for members of the national Fraternal Order of Police.
An avid thinker and, truly, The Serial Decision Maker on a daily basis, Arney spearheaded the development of CPFCU's Financial Planning and Education Center (FPEC), which is distinctly designed to help educate and empower others to be the best they can be. According to Arney, better decision making skills make for better leaders in both personal and professional endeavors. And, through the extremely talented team of both in-house staff and strategic partnerships with local and national organizations, the FPEC continues to work with individuals, families and businesses to learn and leverage lifelong financial management and personal decision making skills. While the FPEC is part of a credit union open to a limited membership base, the FPEC's educational programs are open to the general public; and many of our partners have offices throughout the country.
For more information on the back story of Arney's Serial Decision Maker series, visit Scott's Spot on Patrolmen's Dispatch, or click here.