Stocks Exact Harsh Toll on Would-Be Market Timers

Bull or bear, in stocks lately, the punishment has been the same. Swift and brutal.

Lockstep moves, one day up and the next down, have been sweeping through the market like storms, as paranoia over inflation alternates with optimism the economy can weather it. Tuesday’s swing, in which more than 400 companies of the S&P 500 moved in the same direction, is a pattern that has repeated 79 times in 2022, a rate that if sustained would top any year since at least 1997.

A too-hot-to-handle market is making life impossible for would-be timers, beset with divergent views on how to play the cycle. One study from Bank of America Corp. shows an investor can count on the Federal Reserve’s rate cuts as a sure sign for a market bottom, while another from Ned Davis Research suggests timing your entry according to the first easing is a sucker’s bet.

“Macro trends come and go. And I don’t think there’s more than a handful of people who can actually claim to predict that,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. “I admire the intent behind it, but I do question the utility.”

Increasingly, the world’s largest stock market is behaving like one giant trade whose direction is intractable on a day-to-day basis. Tuesday’s carnage, the worst in two years, was sparked by a hotter-than-expected inflation reading. It followed two straight sessions where more than 400 stocks in the S&P 500 rose.