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tactical asset allocation, market timing

Timing Isn’t Everything – Why I’m NOT a Fan of “Tactical Asset Allocation”

By: Curt Stowers

In spite of all the evidence to the contrary, people continue to believe they can time the market. Read on to find out why I see this as a HUGE mistake. Tactical Asset Allocation is not what you think it is.

New Highs . . . following "End of World" Prognosis

The stock market has been touching on new highs over the past month (July 2019). This comes on the heels of the “end of the world” prognosis that was being put forth by many at the end of 2018 where we saw the market drop precipitously over the fourth quarter. Both of these events, have the so called “experts” prognosticating on “what’s next.”

In the news - common writings on asset allocation

The most common writings—from what I have seen—were:

  • The retreat at the end of 2018 had many suggesting that you needed to be “out of the market” as “clearly” the world was ending.
  • The new highs over the past month had many suggesting that you needed to be “in the market,” as “clearly” the economy was strong and more highs were in store for investors

In the news - also, the contrarians on asset allocation

At the same time, there were the contrarians:

  • The retreat at the end of 2018 had some suggesting that this correction was a great buying opportunity.
  • The new highs over the past month had some suggesting that the market was overbought, and the “smart money” was moving to the side lines.

Whether the pundits were aligned with the majority OR were in the minority, they were each taking an opinion on the SHORT-TERM situation and offering a MARKET-TIMING suggestion.

Yes, "Tactical asset allocation" = Market Timing

To make matters even worse, many professional money managers have adopted the term “tactical asset allocation” to describe their decision to follow a market timing strategy.

  • There is absolutely NO DOUBT in my mind that tactical asset allocation is simply a fancy word for market timing.

However, the term “tactical asset allocation” has a lot more cachet than “market timing.” Hence, in my opinion, this explains the more widespread use of the former.

We have no idea! 

The reality is, I have no idea— nor does anyone else —whether the market will go up or down today, tomorrow, or the next day.

And yet, as always - Abundant evidence of long-term positive results 

There is no evidence (that I have ever seen) that suggests that market timing works as a strategy. HOWEVER, there is ABUNDANT evidence that suggests over the long term, the market produces positive returns.

The attached article goes into more detail on the topic of market timing, and, in particular, the market’s performance after all-time highs. Click HERE to follow the link and read more.


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