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Timing the Market [COVID-19 Edition]

By Matt Shibata

There is an endless debate about the future direction of markets, but the discussion seems more important now and people tend to grasp at any available information when uncertainty is perceived to be high. As always, both the optimists and pessimists have good arguments supported by endless amounts of data, solid logic, and historical analogs. Who should investors listen to and what should investors do?

Fortunately, some of the world’s best investors have chimed in on the topic over the past few weeks.

I don’t have the faintest idea whether the stock market is going to go lower than the old lows or whether it’s not.”

-Charlie Munger, WSJ, 4/17/2020

The future for all these things is clearly unknowable. We have no reason to think we know how they’ll operate in the period ahead, how they’ll interact with each other, and what the consequences will be for everything else.  In short, it’s my view that if you’re experiencing something that has never been seen before, you simply can’t say you know how it’ll turn out.

-Howard Marks, Memo: Knowledge of the Future, 4/14/2020

I don’t think I can make money by predicting what’s going to go on next week or next month. I do think I can make money by predicting what will go on in the next 10 years.”

-Warren Buffett, CNBC, 2/24/2020

First of all … an investor must understand that they probably will not be able to play the game well. They probably will not be able to decide how to move in and out of things. In order to be successful in the markets, it is more difficult than getting a gold medal in the Olympics. You wouldn’t think about competing in the Olympics, but everybody thinks they can compete in the markets.”

-Ray Dalio, TED Connects, 4/8/2020

As usual, the consensus among the top investors today is:

  • Nobody knows where the market is headed.
  • Deciding whether to be in or out of the market right now is unlikely to be profitable.

Turbulent times create some of the best opportunities, so investment decisions do need to be made and executed well. However, many investment opportunities do not rely on the direction of equity markets at all and even equity investors should not focus on the short-term direction of markets (as illustrated above). If the world's top investors do not believe that they can predict the market's direction in this environment, we doubt any investor should.