Is the market expensive? Where to from here and the dangers of Market Timing
The markets have been in a holding pattern of late and I’ve been receiving a number of questions related to what to do from here. Especially given the fact that the market is actually above my year end forecast. I do think that the market is slightly propped up with fed intervention and based on what companies are earning, I think that it’s around 3-4% over valued.
However, believe it or not, I’ve been wrong before…. What we cannot do is try to market time. Market Timing is the definition of getting in and out of the market, based on what anyone thinks. In fact, in my opinion, market timing is probably the most disastrous thing that any investor can do. Trying to guess when to get in and out of the market usually ends up in tears. Below is a graph by JP Morgan funds that highlights this pretty well.
What this shows is that if you were to get out of the market for the best 10 days in the last 20 years then you only received roughly half of what you would have, if you had stayed in the entire time. Obviously it gets worse from there with the more “best days” you miss.
Fact is no one can predict what the market is going to do on a day to day basis, so I would argue that you can’t afford to be out of the market, as the affect can be devastating to long term potential. It’s said the very best of market analysts get it right 6 times out of 10.
As we wrap up the 2nd quarter earnings, we are unchanged with our year end forecast for the S&P 500 at 2150. Our growth forecasts remain unchanged for 2107 and 2018. We will now focus on 3rd quarter earnings and obviously the election for any changes to our forecasts.
As always should you have any questions or concerns please don’t hesitate to contact us.
Regards,
Mick Graham
Branch Manager
Any opinions are those of Mick Graham and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance.
Individual investor's results will vary. Past performance does not guarantee future results. Holding stocks for the long-term does not insure a profitable outcome. Investing in stocks always involves risk, including the possibility of losing one's entire investment. There is no guarantee that any statements, opinions or forecasts provided herein will prove to be correct.
