Curious: does anyone actively sell stocks in this situation - even if it's in a retirement portfolio you'd presumably not touch for a long time? I've sold some in the last few weeks though I know the general advice is not really to do anything.
https://www.businessinsider.com/isaac-newton-lost-a-fortune-...
Wasn't the crash timed with the FED tightening moves?
Most of the indicators have been flashing red for some time though, so I think the coming recession is no surprise.
You have to understand that if indeed people could in general know that the market was going to crash, then people would have already sold, and the impending crash would already have been priced in.
It follows from that, that the current price essentially is our collective best guess at what the future will bring, including any expectations of recessions. Selling beyond that point means you're seeing something that nobody else does, which either makes you a genius (or lucky), or wrong, and the odds are typically not in your favour.
You can find articles on recession indicators flaring up every month for the past decade. Suppose we had no sense of time, and just a sense of the daily weather to track the seasons. A few warm days in a row may indicate summer has landed, or it's just a normal fluctuation, a few weird days as winter turns to spring. And vice versa with cold days. There'll always be some indicators which may signal something bigger, and it could be just noise, or it could be truly indicative. You don't really know until after the fact. And if you could predict it, then it's likely everyone else could, too, and it'd have already been priced in so trying to time the market tends not to work.
This simplifies things a bit, but unless you're close to retirement (at which point you should reduce your exposure to volatile asset classes like stocks anyway), time in the market beats timing the market. There's lots of interesting articles on this like https://awealthofcommonsense.com/2014/02/worlds-worst-market...)
That said, I don't believe in the efficient market hypothesis, so I think people who claim that you can't time the market at all are either wrong or lying.
It is enough to miss few good days or few bad days over years to make a tremendous impact on the final result.
https://www.fool.com/investing/2019/04/11/what-happens-when-...
Think of it like this, imagine you had an hour to build a rock paper scissors AI going up against entire teams of people building RPS AIs for many years. If you build an AI that just returns rand() every single time, you're guaranteed to win about 1/3rd of the time, if you attempt to code anything even slightly more sophisticated, you're likely to get murdered by the other participants. You would have to build something exceedingly beyond your capabilities complex to even get back up to that 1/3rd performance figure.
Same with Passive/Active investment. Either you are 100% Passive or you have to be incredibly, incredibly Active to even match the performance of being Passive, there isn't a middle ground.
I don't see how this is a problem - you don't have to capture all of the value, you just have to do much better than you would have by just holding the shares as the market bottoms out. Even the more sophisticated investors are small-fry when the whole market is considered.
At which point an investor's strategy is below rounding error of optimization algoritms of more sophisticated investors? Or their costs of carry?
Purely theoretical conclusion then is that markets had been perfectly priced ahead over all time horizones.
In doing so you lower your average buying price and have cash on hand if you need it.
Better to stay in the market and keep rebalancing your portfolio. That way your 100% invested at the bottom.
That's something you might think will happen, but you have no idea as you cannot predict the future.
Also, the market can still go up in a recession, war or whatever.