Broker Check

The Dangers of Timing the Market

February 20, 2024

Trying to time the market is a dangerous game.  Unless you’re like Biff Tannen in Back to the Future 2, with an almanac that predicts the future for you, it’s probably an exercise in futility (I’m now realizing some of you are too young to understand that reference which makes me sad…and old).  At the beginning of 2023, this was the predictions of 5 of the most notable investment banks in the country for the S&P total return.

As you can see, the most aggressive prediction was still by over 10 times the actual return.  I understand why the predictions were what they were.  We were still dealing with significant inflation, which in turn led to continuous rate hikes.  We were in significant conflicts and/or providing money to conflicts around the globe.  There was fear of a recession on the horizon as many felt that the “soft landing” was going to be a tough task for the Fed.  All of those fears were real, but if you moved some money to cash out of fear, you did significant damage to your financial plan, particularly coming off of a tough year in 2022. 

The reality is not much has changed in 2024.  Some inflation readings have come in hotter than expected, so while rate hikes are on pause, rate cuts are probably not in the immediate future.  We are involved in more significant conflicts than a year ago, and while some recession fears have eased, we still may end up blowing a tire on this “soft” landing, yet the S&P 500 finds itself up over 5% year-to-date.

The media is going to bombard you with negativity.  Fear equals clicks.  Suze Orman and Dave Ramsey are going to pontificate on television and podcasts as to why one product is better than another.  Investment banks and pundits are going to continue to make predictions about stock market returns.  Here is the problem, I have over 200 clients and they are ALLLLLLL different.  You cannot provide personalized advice to thousands of people in a vacuum.  Everyone’s goals are different, lifestyle is different, risk tolerance is different and time horizon is different.

It’s what I feel is one of the largest benefits to working with a company like Birds Eye Wealth Planning.  You aren’t calling an 800 number; you’re calling my cell phone.  We are having discussions about your life that I am intimately aware of.  When’s the last time Suze Orman was in your kitchen for a glass of wine and to see how the kids were doing?  Didn’t think so.

Your plan is YOUR plan.  That’s why setting up goals for each account is so important.  If you are 30 and we have an account established for retirement, who cares if there is fear of a market downturn.  Who cares if you see a return like 2022.  You’re buying low and have 30 years to grow those dollars.  If you’re 60 and plan to retire in 5 years, we are having a completely different conversation.  You definitely care…a lot.  There is always a happy median between fully in and fully out of the market.  There are always financial products we can utilize to mitigate risk.  Some of the products I see vilified by so called “experts” play huge roles in risk mitigation.  It’s either ignorance, click bait or stupidity…probably all the above.

If something pops up on a social media feed that you have questions or fears about, call me.  If something you hear while hanging out with friends intrigues you, call me.  If someone presents you with an opportunity that seems too good to be true, run for the nearest exit…but still call me.  Predicting the future is a dangerous game, unless you have an almanac.  If you do we can be best friends.

If you know anyone that may benefit from this, please share it.