I noticed an interesting economic phenomenon that explains a lot about the markets. It's about the ratchet effect — when prices rise easily but fall very reluctantly, even after the reasons for the increase have disappeared.

Imagine the ratchet mechanism in machinery — movement only forward, no backward. It works similarly in economics. Companies raise prices when costs increase, but when costs decrease, prices stay put. They simply remain at the new, higher level.

Why does this happen? First, inflation expectations. When inflation is prevalent in the economy, companies incorporate future expense increases into their prices. It becomes a habit. Second, psychology. Consumers perceive price reductions as a sign of quality or brand reputation problems. Nobody wants to be seen as cheap.

There are also practical reasons. Companies use higher prices to compensate for previous losses during times of instability. Plus, the so-called menu costs — administrative expenses involved in changing prices. Contracts need to be rewritten, price tags replaced, new campaigns launched. It's easier to leave things as they are.

The ratchet effect is especially noticeable in commodity and metal markets. Producers raise prices on finished products when raw material costs increase, but when raw materials become cheaper, prices for the final product remain high. It's important to keep this in mind when analyzing the stocks of such companies.

By the way, this creates a solid foundation for stable income growth for companies. That’s why the ratchet effect should be considered when selecting assets for long-term portfolios.

Currently, there’s interesting dynamics in the crypto market. Bitcoin is trading around 69.68K, up 3.37% over the past 24 hours, and Ethereum stays at 2.14K with a 3.83% increase. Keep an eye on these levels — they could become key for future movements.