Egg-onomics: A Lesson in Price Moves

Isaac Newton might be smiling if he looked at the charts for eggs, cocoa, and coffee prices.  To traders, they are a lesson on how markets can reach an extreme and then correct. But to Newton, they are simply a lesson in gravity.

Egg-onomics: The price of a dozen eggs hit $8.12 in March. It’s $2.53 in June. Why the drop? Demand has slowed, and supply has increased.Candy-palooza: Chocolate (cocoa) hit $10,417 per kilogram in December. It’s now $8,163. Why the drop? Less demand from North America, combined with favorable weather patterns. Coffee-bucks: A pound of coffee touched $4.34 in February. It’s $3.45 in June. Why the drop? Production has increased, and the weather has been favorable in growing areas. Once you read about big price swings like what happened in eggs, coffee, and cocoa, it’s likely that most of the upside—or downside—move has already been completed. And chasing trends rarely works when investing for the long term.

What does work is focusing on your goals and time horizon and selecting investments that match your risk tolerance. For most, building wealth is a process that’s helped by consistent investing and time.