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The perils of market timing in a golden age of earnings growth

December 7, 2021
clock 6 MIN READ
  • Stock markets have had a good run since early 2020 amid mostly calm conditions, but we’re not surprised by recent volatility. 
  • We don’t equate higher volatility with a high likelihood that we’re headed toward a bear market or a recession in the near future.
  • Market timing requires two choices: when to sell, and when to buy back in. The costs associated with mistiming either of these decisions mount quickly.

It’s quiet. Too quiet. 

Film directors know that the best way to set the stage for the entrance of a howling T-Rex or a hungry great white shark is to let an eerie calm unsettle the audience. 
Fortunately, real life doesn’t work that way. Investors can be assured that there’s no good evidence indicating that current conditions can reliably tell us anything about what will come next.

Why bring this up now? Some might say it had been too quiet in financial markets prior to the recent return of volatility. Stock markets have had a good run since early 2020 without experiencing much volatility. We wouldn’t be surprised to see a bit more volatility going forward, given some of the risks facing the global economy. But we believe the positives outweigh the negatives.

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Important Information
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Positioning and holdings are subject to change. All information as of the date indicated. There are risks involved with investing, including possible loss of principal. This information should not be relied upon by the reader as research or investment advice, (unless you have otherwise separately entered into a written agreement with SEI for the provision of investment advice) nor should it be construed as a recommendation to purchase or sell a security. The reader should consult with their financial professional for more information.

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