The traumatic market collapse of 2008 and 2009 has left a scar on the hearts of many an investor. Which is why it’s understandable that calling the next market top has become so popular. In fact, since 2010 there have been over 20 prominent financial experts who have proclaimed a market top and recommended selling, and going to cash in preparation of a a major bear market.
Of course all of them have been wrong, as the market has continued to climb the ever present Wall of Worry and moved higher. That’s not to say that at some point we won’t have a bear market (20% decline from highs), or even an all out crash (30%). However if you’ve been listening to the “experts” during the last few years you will have almost certainly have underperformed the markets.
A research report from Bank of America Merrill Lynch’s Savita Subramanian is very interesting. He looked at the last 80 years of market data and found that the the final 6, 12, and 24 months of a bull market accounted for, on average, 11%, 19%, and 44% of all returns during that time, respectively.
This bull market has been similar, with 38% of total returns from this bull market occurring over the last two years.
That makes sense since historically the market has risen, on a year-to-year basis, 70% of the time. Now of course volatility during even the good years can be extreme, as anyone who was around in January of 2016 can attest. However, the point I’m trying to make is that the key to avoiding massive losses isn’t necessarily to sit on the sidelines and wait for a crash that may still be years away, and that NO ONE can actually predict.