Market timing

Research Highlight: Don't time the market

28 Aug 2020

A key goal of ours is to deliver value to clients by sharing research reports, insights, and macro perspectives outside the typical performance updates. Today we are sharing one that you might find interesting.

Research Highlights

Some of the questions most financial advisors get asked often by their clients are: when should I invest? Should I wait for a market dip? We explored various approaches used to deploy capital: from dollar-cost averaging (fixed amount on monthly or quarterly schedule), to lump-sum (once a year), and timing for when the market dips.

The analysis going back over 20 years indicates that employing a monthly investment plan generally outperforms in the long run versus staying out of the market longer (quarterly or annually). More importantly, attempting to time the market results in subpar performance. In summary, create a plan today and stick with it. Invest when able and as your situation allows irrespective of short-term market movements. Read more here.

What we are tracking

New Monetary Policy Framework

Yesterday, Fed Chair Jerome Powell announced the adoption of average-inflation targeting, a policy strategy aimed at minimizing the social loss of monetary responses to price-target. With this policy, we could expect a dampened response to inflation rates slightly above the standard 2% target. Actions by the Fed play a critical role in stabilizing the economy. We will be accessing the implications of the new strategy on capital markets.

The aftermath of Hurricane Laura

The first major category 4 storm this year made landfall in Lousiana and Texas at 150mph before ripping northwards to Arkansas. We have seen severe power outages and disruptions in oil & gas production. We are closely tracking the aftermath of the storm.

Xantos Labs ("Xantos", "XL") is an SEC-registered investment adviser.

The information contained herein is only as current as of the date indicated and may be superseded by subsequent market events or for other reasons. The views expressed here are those of the authors and not necessarily those of Xantos. Charts and graphs provided herein are for illustrative purposes only. Nothing contained herein constitutes investment, legal, tax, or other advice nor is it to be relied on in making an investment or other decision. There can be no assurance that an investment strategy will be successful. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment which may differ materially and should not be relied upon as such. XL and its affiliates may have positions (long or short) or engage in securities transactions that are not consistent with the information and views expressed in this document.

Diversification does not eliminate the risk of experiencing investment loss. Past performance is not a guarantee of future performance.

The information in this document may contain projections or other forward-looking statements regarding future events, targets, forecasts, or expectations regarding the strategies described herein and is only current as of the date indicated. There is no assurance that such events or targets will be achieved, and they may be significantly different from that shown here. The information in this document, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.

Hypothetical performance results have many inherent limitations, some of which, but not all, are described herein. The hypothetical performance shown was derived from the retroactive application of a model developed with the benefit of hindsight. Hypothetical performance results are presented for illustrative purposes only.

This material is intended for informational purposes only and should not be construed as legal or tax advice, nor is it intended to replace the advice of a qualified attorney or tax advisor. The factual information set forth herein has been obtained or derived from sources believed by the author and XL to be reliable, but it is not necessarily all-inclusive and is not guaranteed as to its accuracy and is not to be regarded as a representation or warranty, express or implied, as to the information’s accuracy or completeness, nor should the attached information serve as the basis of any investment decision.

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