The Funny Thing About Market Cycles


Why do stock market investors sell when prices collapse and buy when prices soar? Why do real estate owners display the same irrational behavior? The math is hardly difficult. It’s better to buy when valuations are low and sell when they are high. Yet human nature seems to require that we run with the market cycles instead of against them.

It’s easy to see how that plays out in M&A. The other day, one of our clients said to me: “We’re retrenching like everyone else”. Well that’s honest, but hardly inspiring. My response is: If you have a plan for growth, stick to it, irrespective of the market. After all, a good financial advisor would say no less about your plan for retirement. Stand by your strategy through good times and bad.

I understand the real world of company dynamics makes this easier said than done. In any organization, there will be a handful of people with the vision to see that M&A is often the fastest track to growth. But in times of economic anxiety, they will be told that their ideas are far too risky, that all we should be doing is focusing on cutting costs and getting by.

In reality, the long-term winners will be those that are seizing on the extraordinary opportunities this current period is producing. They will be more proactive than ever, not just looking for bargains but seeing the chance to expand in existing markets and penetrate new ones by joining force with other players who are now more motivated than ever to contemplate some form of union.