Key insights
- The author expresses concern about an impending oil shock and its potential negative impact on equity markets within the next 1-12 months. Despite acknowledging the difficulty of market timing, they are considering reducing equity exposure to hedge against a potential 20-30% market fall, even if it means missing out on modest gains. This sentiment suggests a growing risk aversion among investors, potentially leading to reduced demand for equities and downward pressure on prices.
I buy a certain amount of stocks every month into a broad index fund. For me, this is the easiest way to invest and I know it’s impossible to time the market.
However, I feel it’s hard to justify staying in the market right now. Are the risks of the oil shock correctly priced into the current prices? You would assume so, but a lot is pointing towards some sort of shock down the road (1-12 months from now). And if it does happen, it looks to be quite bad. It is not possible to time the market, but if you can see a meteor coming at you and there’s a medium-high risk it will hit you, why not play it safe?
Its hard to imagine that the market will increase 10-20% the resting the year even if war ends right now. But it’s not hard to imagine it falling at least that much if it continues. So as I see it, I’m risking missing out on 1-5% gains rest of the year in order to hedge against a potential 20-30% loss.
Am I being an idiot trying to time the market, even tho I shouldn’t?