The Difficulty of Timing the Stock Market

October 13, 2016

Since markets hit their 2016 troughs back in February, they have continued to rally and hit new all-time highs over the course of this year. With the upcoming election, talks and discussions surrounding a market bubble and looming recession, investors have begun to ask themselves if now is the right time to start lowering their equity market allocations to better position and protect themselves.

Of course, reducing equity exposure in anticipation of a market downturn requires close to perfect timing on the front end — reducing equity exposure — and on the back end — renewing equity exposure. The cost of getting this timing wrong can be dramatic, especially if some of the days on the sidelines end up being some of the strongest days of market returns on record — which is especially true on the days coming out of a correction. Our chart above illustrates the dramatic shortfall which can emerge if investors are out of the market on notably high returning days in the market. Clearly, despite the inherent volatility of the stock market, it is better to be fully invested in the market than trying to time the market in anticipation of market corrections and subsequent recoveries.

Note: Returns calculated using daily price returns of the S&P 500 Index over the past 50 years, for the period ending September 30, 2016.

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Related Content

05.14.2024

The “Fix” Is In!

The strength of the U.S. economy over the last several quarters has surprised many investors, as consensus expectations from the…

05.09.2024

The Emergence of Argentinian Equities

Argentina has faced myriad economic headwinds in recent time, including hyperinflation, currency-related difficulties, and a series of defaults on its…

05.02.2024

Is Bitcoin Fairly Valued?

Despite mixed performance to start 2024, bitcoin finished the first quarter up roughly 68%. Buoyed by a broad weakening of…

04.26.2024

1Q 2024 Market Insights Video

This video is a recording of a live webinar held April 25 by Marquette’s research team analyzing the…

04.25.2024

Mind the Gap

Any ride on the London Tube reminds riders to mind the gap: Beware the space between train car and platform…

04.24.2024

Japan: This Year’s Vacation Recommendation

Foreign investment isn’t the only thing streaming into Japan. In 2023, the number of travelers to the country surpassed long-term…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >