The U.S. stock markets have struggled mightily so far in 2016. This comes after 2015 individual company 401(k) retirement plan investment returns were lousy at best.
At the current stage of this stock market cycle, every stock market investor who is motivated to sell their stocks has already sold. The only people left holding on to U.S. stocks now are still hoping against hope that the stock markets will rise.
Eventually, new buyers for U.S. stocks will emerge. When new demand comes in, it will not make any difference what the world economic news is focused on. The financial news headlines about oil prices, gold, Europe, banks, the Fed, inflation, unemployment, or the November election will quickly fade away.
When the demand for U.S. stocks overtakes supply, stock prices will go back up. At that time, every Minnesota 401(k) company retirement plan participant you know will finally “make money” in their company 401(k) retirement plan account.
Right now, there has been more supply (sellers of stocks) than demand (buyers of stocks) over the first few months of 2016.
Stock market prices are not super sophisticated. The prices of U.S. stocks follow the basic law of supply and demand. There are numerous examples of the battle between supply and demand all around us in everyday life.
Currently, the supply of existing homes for sale has decreased dramatically. The result is higher home prices. So, now is a good time to sell your home.
When the demand from Minnesota companies hiring new employees dries up, the supply of workers looking for a new job (unemployment rate) rose. Fewer jobs offered (supply) means more people looking for jobs (demand).
When Minnesota businesses stopped borrowing money to expand (demand for money) because of the slowing U.S. economy, interest rates (supply of money) dropped to historic lows. Those conditions have existed for the last several years.
A drastic change in the supply always causes an equally drastic change in the demand of the corresponding good or service.
The stock market goes down for only one reason; there are more sellers than buyers of stocks. The stock market goes up for the opposite reason; there are more buyers than sellers of stocks.
The price of everything is controlled by supply and demand. This knowledge can improve the investment management decisions you need to make in your Minnesota company 401(k) retirement plan account.
Ric Lager
Lager & Company, Inc.
