Economic and Psychological Pendulums Swing Together

Mar 1999 //
Optimism/Pessimism
Investing
Economics
Cycles

In addition to the swings of economic factors such as demand and supply, markets are affected by psychological swings, which tend to reinforce economic swings.  When prices are declining, investors tend to want to sell investments (whether they be oil, stocks, bonds, mutual funds or whatever), and when prices are rising, investors tend to want to jump aboard.  Thus, economic and psychological pendulums tend to swing together and, therefore, really move markets.