A Note on Market Timing

“You wouldn’t believe me if I told you.”

That’s the phrase I imagine I’d use if someone had disappeared from society on December 31, 2019, cut off their media, maybe traveled to their remote cabin in Alaska, then reappeared on December 31, 2020 and asked me how the markets behaved while they were gone.

“Seriously, you wouldn’t believe me if I told you.”

Let’s take a moment and look back on a few of the key items that stirred the equity markets in 2020 and use our reflection to reaffirm the fact that you just can’t predict these things.

1. COVID-19

This needs no introduction, so let’s take a look at the numbers. The Standard & Poor’s 500 (S & P 500) grew steadily to start the year with volatility in early February, only to hit its year-to-date (YTD) high on February 19, 2020. From there it was almost a straight shot downhill, hitting its YTD bottom on March 23rd. This movement – what is called peak to trough – was a nauseating 35.56% swing[1]. Couple the sharp drop in equities with the sheer uncertainty of what life itself was going to look like going forward, and I know we were all feeling the pain. Where this gets interesting is what happened next. The market (remember I am referring to the S & P 500 here) began its recovery. It went up. We weren’t even out of spring quarantine yet, and it began to recover. No vaccine, hospitals still at capacity or overflowing, schools still out, businesses still suffering, all of it. Yet the market began its crawl up. What? How did it recover so quickly, and why? This makes no sense. It should have gone lower, it should still be lower for crying out loud! We still have unemployment, we have businesses that have gone bankrupt, we have restaurants leaving town. What happened?

I could spend an afternoon discussing market weightings and how markets can be driven by just a few forces, but that’s for another day. Let’s stick to the well-known facts here, and the well-known fact is that the market not only recovered, it set records. By August 21st, the S & P 500 had eclipsed its previous high for the year[2] and here we are at the close on December 31st and a new high has been established.

The point I’m trying to make is simple. There’s no way you could have guessed this, and there’s no way you could have timed this. None. No one saw any of this coming. Did you go to cash? Did you stay in cash? Did you abandon your plan? Did you have a plan to begin with?

2. The Election

The same year we go through a global pandemic would be the same year we are due for an election. Makes sense, doesn’t it?

I hear the same story from the media, from investors, from anyone, every single election cycle. Let’s prepare for volatility. This election could get heated. No telling how the markets will react. Those are the default stances for absolutely everyone, every cycle. The fact is if we have equity market exposure of any kind, we should be prepared for volatility every single morning and there’s never any way of telling how the markets will react to anything, ever. These default stances are displeasing, as they are merely words thrown together to form sentences that resemble a qualified prediction.

So, what happened this election cycle? Was the election heated? I think that’s a very fair statement. Was there uncertainty? Goodness, yes. This was literally a contested election. Heck, it’s still being contested, and we’re still not fully decided on the Senate. Still! How did the market react? Well, from October 1, 2020 to December 31, 2020 the market grew 11%. The entire three-month period that encapsulated a contested and fiery election saw double digit growth. Who saw that coming? I’ll save you the suspense. No one.

Back to our disappearing investor…

Oh yes, the investor who disappeared to her cabin in Alaska for the year. Imagine that conversation. Where do we even begin? Do we go knee deep into the details of the two events I mentioned above? I could breakdown the recession, Paycheck Protection Program loans, face masks, vaccines, lockdowns, hospital capacity, lawsuits, Senate races, electoral college, I could keep going but my head hurts! I think I’d leave out all the subjective and opinion-based biases I hold on those topics and simply say, “The S & P 500 finished a positive 16% for the year.”

Folks, the moral of the story: Create a plan you believe in and stick to it. If you need guidance creating a financial plan that fits your needs, we at BerganKDV can help. Contact your trusted financial advisor or  start here.


Diversification and asset allocation do not ensure a profit or guarantee against loss.

The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

The views expressed are those of BerganKDV Wealth Management. They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. Investment advisory services and fee-based planning offered through BerganKDV Wealth Management, an SEC Registered Investment Advisor.


[1] Retrieved on 31 December 2020 from: https://finance.yahoo.com

[2] Retrieved on 31 December 2020 from: https://www.barrons.com/market-data?mod=BOL_TOPNAV

CATEGORIES: Wealth Management
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