Time in the market is better than timing the market

MANY market observers are of the view that the outlook for US stocks is fundamentally bearish. It is said that the first-half performance in which the Nasdaq, S&P 500 and Dow Jones Industrial Average gained close to 32 per cent, 16 per cent and 4 per cent respectively is actually a case of prices overrunning their fundamentals. Investors are therefore advised to tread cautiously.

While practising prudence in an uncertain economic environment is undoubtedly good advice, it would be better for investors to bear in mind one of the market’s central maxims, namely, “time in the market is better than timing the market’’.

In the case of Wall Street, and by extension global equities, investors should not forget the “put option’’ installed in the aftermath of the 1987 stock market crash by then-Fed chief Alan Greenspan, which was essentially a guarantee that the US central bank would flood the market with as much liquidity as it took to stave off financial disaster.