It’s About Time In the Market, Not Timing the Market04-16-2019 |
Sources: Sources for data in tables: Equity Market and Fixed Income returns are from JP Morgan as of 04/12/19. Rates and Economic Calendar Data from Bloomberg as of 04/15/19. International developed markets measured by the MSCI EAFE Index, emerging markets measured by the MSCI EM Index. Sector performance is measured using GICS methodology.
Global equity markets returned modestly positive results last week. In the U.S., the S&P 500 Index finished the week at a level of 2,907, representing a weekly gain of 0.56%, while the Russell Midcap Index followed suit gaining 0.91% for the week. On the international equities front, developed markets returned 0.30%, while emerging markets advanced 0.41%. Finally, the 10-year U.S. Treasury yield rose marginally finishing the week at 2.56%.
Believe it or not, it’s been approximately 10 years since the S&P 500 Index bottomed out in March of 2009 following the Great Financial Crisis of 2008. After a decade of strong U.S. stock market growth, and a particularly impressive start to 2019, many investors may be questioning whether another “2008” is around the corner and if it may be time to abandon U.S. stock market exposure in an attempt to time the potential sell-off. In past issues, we’ve written extensively about our assessment of the health of the U.S. economy. This view has not changed. We do not think another “2008” is around the corner. It is our hope that the chart below will serve as a deterrent for those who believe that their chances of accurately timing an imminent stock market crash are high.
The paramount takeaway from this chart is that successful stock market investing is determined by time in the market, not timing the market. In fact, historically a holding period of 1 month has produced a positive return 62% of the time, whereas a 5-year holding period produced positive returns 89% of the time, and a 15-year holding period produced positive returns 100% of the time! In other words, an investor’s chance at success drastically increases as the holding period increases. This does not mean, however, that adjustments should not be made to your portfolios due to changes in the economy and stock market momentum. Accordingly, we encourage investors to work with experienced financial professionals to help manage their portfolios through various market cycles within a well-diversified framework that is consistent with their objectives, time-frame and tolerance for risk. If you would like to learn more about how we are helping clients invest dynamically and consistently with their own goals, time-frame and tolerance for risk, please do not hesitate to speak with your Hennion & Walsh Financial Adviser.
Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. These risks are heightened in emerging markets.
There are special risks associated with an investment in real estate, including credit risk, interest rate fluctuations and the impact of varied economic conditions. Distributions from REIT investments are taxed at the owner’s tax bracket.
The prices of small company and mid cap stocks are generally more volatile than large company stocks. They often involve higher risks because smaller companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions.
Investing in commodities is not suitable for all investors. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity.
Products that invest in commodities may employ more complex strategies which may expose investors to additional risks.
Investing in fixed income securities involves certain risks such as market risk if sold prior to maturity and credit risk especially if investing in high yield bonds, which have lower ratings and are subject to greater volatility. All fixed income investments may be worth less than original cost upon redemption or maturity. Bond Prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline of the value of your investment.
MSCI- EAFE: The Morgan Stanley Capital International Europe, Australasia and Far East Index, a free float-adjusted market capitalization index that is designed to measure developed-market equity performance, excluding the United States and Canada.
MSCI-Emerging Markets: The Morgan Stanley Capital International Emerging Market Index, is a free float-adjusted market capitalization index that is designed to measure the performance of global emerging markets of about 25 emerging economies.
Russell 3000: The Russell 3000 measures the performance of the 3000 largest US companies based on total market capitalization and represents about 98% of the investible US Equity market.
ML BOFA US Corp Mstr [Merill Lynch US Corporate Master]: The Merrill Lynch Corporate Master Market Index is a statistical composite tracking the performance of the entire US corporate bond market over time.
ML Muni Master [Merill Lynch US Corporate Master]: The Merrill Lynch Municipal Bond Master Index is a broad measure of the municipal fixed income market.
Investors cannot directly purchase any index.
LIBOR, London Interbank Offered Rate, is the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London.
The Dow Jones Industrial Average is an unweighted index of 30 “blue-chip” industrial U.S. stocks.
The S&P Midcap 400 Index is a capitalization-weighted index measuring the performance of the mid-range sector of the U.S. stock market, and represents approximately 7% of the total market value of U.S. equities. Companies in the Index fall between S&P 500 Index and the S&P SmallCap 600 Index in size: between $1-4 billion.
DJ Equity REIT Index represents all publicly traded real estate investment trusts in the Dow Jones U.S. stock universe classified as Equity REITs according to the S&P Dow Jones Indices REIT Industry Classification Hierarchy. These companies are REITs that primarily own and operate income-producing real estate.