The Cycle of Highs and Lows in the Market: The Search for Profit and the Return to Equilibrium
In the market, whether financial, real estate or commercial, the concept of an infinite high is unrealistic. Everything that goes up eventually goes down, due to the dynamics of supply and demand combined with the human search for profit.
When something is on the rise, it attracts interest and generates appreciation. However, as the price rises, more people and companies enter the market to profit. This increases supply, causing prices to fall.
For example, in the real estate market, during appreciations, investors buy hoping to resell at a higher price. However, the excess supply of properties ends up reducing prices due to lack of demand. Similarly, in commodities such as oil, highs encourage greater production or the search for alternatives, correcting prices.
This dynamic also applies to common products. When something becomes a trend, new competitors emerge, and the excess supply leads to price drops.
Market cycles, created by the search for profit, are natural. When prices fall, many people abandon the sector, but the more patient ones wait for the next rise. This fluctuation maintains balance and corrects excesses, avoiding unsustainable markets.
Recognizing that “what goes up must come down” is essential for planning business and investments. The market moves in cycles, guided by the adaptation of supply and demand. Understanding this is vital for those seeking to profit.
