Time 'In' the Market: Do Investors Actually Adhere?

“I do not know of anybody who has done [market timing] successfully. I don’t know anybody who knows anybody who has done it successfully and consistently” Jack Bogle, Founder Vanguard.

If you have read any of our blogs over the last several years, you would know that my firm, LCM Capital Management, despises my industry when it comes to predicting markets direction, economic activity or inflation and GDP growth or lack thereof.  We always tell our clients to turn off the financial news networks and the talking heads since all they are doing is guessing and they typically guess wrong. We can’t think of a better example than our present day.

Most everyone who invests has heard the following cliché’, It’s time in the market not timing the market. Our question is, do investors actually adhere to it? What about their brokers, advisors or CFP’s?

We ask this simple question because based on what has happened to the stock market over the last month or even the last few weeks, aka since President Trump’s tariffs announcement, it appears very few investors, besides my firm, seems to actually believe in this cliché’. Stocks had an unprecedented tumble. The S&P 500 closed out the month of February at 5954. April 7^th, it closed at 5062. That’s approximately a 15% drop in a little over a month. Clearly people were selling. I intentionally used the word “people” since investors they are not.  

Fast forward two days (an eternity, right?) April 9^th and the S&P 500 just had its single biggest day since 2008 jumping over 9.50%, in a single day! The cause? President Trump put a 90 day pause on many of his tariffs.

So now that this happened what should an investor do? If you sold on your own or were told to get out by your broker the question becomes, should or when do you get back in? The problem with trying to time the market is sure you may have gotten lucky and sold but now you have to get lucky again and know when to buy. One thing is for certain, most investors that were out probably missed this move today. And there was no reason to from our perspective. I say this with much certainty because according to an article on cnbc.com written by John Melloy and Hakyung Kim, Trump’s pause declaration went out at 1:18 p.m. ET when the Dow was about 350 points higher for the day. Seconds later, the 30-stock index surged more than 2,000 points.  Read that again, seconds later the market moved over 5%. Now how many people got a call from their broker telling them to buy? It reminds me of when my kids were young and they would tell people that what their dad did for a living was make people “broker.”

Watching your portfolio drop by 5 or 10 or 15% is not fun. I have yet to find anyone in my 37 years of managing money who likes losing money. But I am telling you that if you lived by the mantra of staying invested and not listening to the “experts” you’d be better off. Our clients certainly are.

These “experts” over the last few weeks and days have been warning investors of an impending recession or stagflation or something even worse. JP Morgan raised the odds of one to 60% on April 4^th. Goldman Sachs raised the odds twice in a week and as of April 7^th had a 45% probability of one, then today April 9^th, according to the same website above, the following headline came out, Goldman forecast a recession then almost immediately rescinded it after Trump tariff pause. If this doesn’t tell you everything you need to know about forecasting than nothing will. We mention this because whether or not a recession does actually materialize is just a guess and you should never invest on a guess. Remember when the Fed started its unprecedented rate hiking campaign back in 2021 and the yield curve went inverted, meaning short-term rates were higher than longer-term rates? Wall Street came out of the woodwork saying this always (90%+ of the time) leads to a recession. Well one never materialized. We can go on with plenty of examples of Wall St. and their awful predictions and we are sure not making one today but this market’s volatility is not over and April 9th may or may not have been the bottom of this correction but what investors need to remember is the markets will always go up and down, sometimes violently, but if you stay invested to your risk tolerance and stay diversified throughout both stocks and bonds you can withstand any bout of market volatility and simply laugh the next time an “expert” tells you what will happen next.