Timing the Market is Impossible

As conflict in the Middle East continues, so does market volatility. As we stated last week, volatility comes with investing, but nonetheless, investors are naturally concerned with the instability in financial markets. During times like this, it is natural for investors to think that moving out of the market is the right decision, to simply reinvest when volatility subsides. But the reality is while market timing might make sense in theory, it is impossible in practice. With that in mind, today’s weekly market commentary is a reminder of an old investment adage – time in the market beats market timing.

The enclosed piece examines historical data using three charts. The first chart illustrates daily moves in the S&P 500 Index during the 2025 trading year. As can be seen, most of the best and worst days of the S&P 500 Index occurred within a tight window. When President announced tariff policy, the Index saw a sharp daily drop of -4.83% on April 3 and then another daily drop -5.96% on April 4. But then on April 9, when President Trump announced a 90-day pause on reciprocal tariffs, the Index rose 9.52%. Then in less than a month’s time after that, the Index saw a daily drop of -3.44% but then daily gains of 2.51% and 3.27%. As the piece explains, “the S&P 500 Index had a strong year in 2025, finishing up 17.88%, but the ride was anything but smooth. In the spring, the Index fell nearly 19%, largely because markets reacted poorly to President Donald Trump’s April announcement of a new tariff policy. But interestingly, the best single day of the entire year happened on April 9, right in the middle of all that volatility. Missing just that one day would’ve slashed your full year return by more than half.” – CCWP174_0226 5204966

The second chart then shows how missing the best days in the market (again measured by the S&P 500 Index) would have been costly. The chart shows that in 2025, the S&P 500 Index returned 17.88% for those who stayed fully invested through the entire year. However, missing just the one best day, as mentioned previously, would have dropped the annual return to 7.64%. That represents a decrease of 57%. Missing the best two days would have dropped the annual return to 4.23% or a 76% decrease. Missing the best three days would be a 91% decrease to a 1.67% annual return. And amazingly, if investors missed the best four days in 2025 there would have been a 103% decrease with a negative return of -0.46% on the year.

And finally, the third chart shows that 2025 was not an anomaly. This chart illustrates the average annual total return of the S&P 500 Index from 1996 through 2025. For those investors who were invested all days during that time frame, the average annual return would have been 10.35%. When excluding the best 10 days over that 30-year period, the average annual return would have dropped to 7.38%. When excluding the best 20 days, the average annual return dropped to 5.45%. Miss the best 30 days and the average drops to 3.83%. Missing the best 40 days drops the average annual return to 2.40%. And finally excluding the best 50 days drops the average annual return all the way down to 1.08%. And for those investors who were invested in Treasury Bills all days during that same time frame – 1996 through 2025 – the average annual return would have been 2.31%, outpacing if you were invested in the S&P 500 Index but missed the best 50 days.

Market volatility is certainly uncomfortable but certainly unavoidable if you are investing. However, sticking to your specific plan and overall goals, while maintaining discipline, has proven, as the piece shows, to pay off in the long term.