by Charles Cheng, CFA

 

 

As we begin the New Year in 2025, as always there are many things that investors worry about with respect to the broad market and economic environment.  The new US presidential administration promised to implement trade tariffs which could have a host of negative economic consequences, including a retaliatory trade war from China, inflationary pressure domestically, and weaker economic growth worldwide. Given the strong performance of the overall market over the past few years, it’s a normal reaction of investors to want to protect their gains.  However, according to common market wisdom, it never seems like a good idea to fight the market trend and to try to call tops and bottoms.  Given the difficulty of reliably timing the market, does it ever make sense to do so? We examine what we know about market timing and what kinds of risks and opportunities there may be.

隨著 2025 年新年的到來，投資者一如既往地對大盤和經濟環境有諸多擔憂。　 美國新總統政府承諾實施貿易關稅​​，這可能會帶來一系列負面的經濟後果，包括來自中國的報復性貿易戰、國內通膨壓力以及全球經濟增長放緩。　鑑於過去幾年整體市場的強勁表現，投資人想要保護自己的收益是正常的反應。　 然而，根據常見的市場觀點，對抗市場走向並試圖預測市場的高低點似乎從來都不是一個好主意。　 由於準確把握市場時機的難度，這樣做是否有意義呢？我們會研究我們對市場時機的瞭解以及可能有哪些風險和機會。

 

 

Market Timing is Hard

One of the central tenets of academic finance is the efficient market hypothesis, where all available information is already reflected in current asset prices. While not everyone agrees with the hypothesis’ assertions, the notion that it would be difficult to predict where the market is going in the short term based on information available to all market participants is straightforward and reasonable. Doing so reliably would mean that you had some proprietary methods that would be extremely difficult for any other market participant to discover and replicate.

市場時機很難掌握

學術金融的核心原則之一是有效市場假說，就是指市場中所有可用資訊都已反映在當前資產價格中。　雖然並非所有人都同意該假設的論斷，但認為基於所有市場參與者可獲得的資訊很難預測短期內市場走向的觀點是簡單而合理的。　可靠地做到這一點意味著你是擁有一些專有方法對的，而且其他市場參與者很難發現和複製。　

 

 

Market Cycles are correlated with the Business Cycle

A business cycle is defined by four stages, including, expansion, peak, recession, and trough. While not perfectly in sync, market cycles are closely related to economic and business activities as its accumulation phase tends to be during the expansion of the business cycle and downtrends tend to correspond to recessions.  This is because not only are securities and assets valued based on future economic activity, but also because both cycles are driven by the feedback loops that dominate human behavior when making economic decisions in the face of uncertainty. For markets, optimism grows during the uptrend phase, investors may drive prices higher, leading to elevated valuations. Conversely, negative sentiment during downturns can exacerbate declines as panic selling occurs. Similarly, more consumer and business spending is good for economic growth, and spurs additional spending, and vice versa during tight economic conditions.

市場週期與商業週期相關

商業週期可分為四個階段，包括擴張期、高峰期、衰退期和低谷期。　雖然並非完全同步，但市場週期與經濟和商業活動密切相關，因為其累積階段往往是在商業週期的擴張期間，而下降趨勢往往與衰退相對應。　 這是因為證券和資產的估值不僅是基於未來的經濟活動，而且因為這兩種週期都是由反饋迴路驅動的，而反饋迴路在人類面對不確定性做出經濟決策時主導著人類行為。　對於市場而言，在上升趨勢階段，樂觀情緒會增強，投資者可能會推高價格，導致估值上升。　相反，經濟低迷時期的負面情緒可能會因恐慌性拋售而加劇下跌。　同樣，在經濟緊張的情況下，增加消費者和企業支出有利於經濟成長，並刺激額外支出，反之亦然。　

 

 

Cycles can tend to go to extremes

Because of the aforementioned feedback loops, even if economic and market activity always eventually return to a baseline trend, they can swing to levels far beyond what can be justified with rational economic behaviour. In other words, you can be right about markets being over valued or correcting below current levels at some point in the future, but still be extremely wrong both in terms of timing and in the amount of loss that you can suffer before that happens. Also, knowing that you are currently at a market extreme doesn’t necessarily mean that it is at a turning point. Therefore your strategy needs to take into account the unpredictability and uniqueness of each boom and bust cycle.

週期可能會走向極端

由於上述回饋迴路，即使經濟和市場活動最終總是會回到基線趨勢，它們也可能波動到遠遠超出理性經濟行為所能解釋的水準。　換句話說，您可能正確地預測到市場在未來某個時候會被高估或跌破當前水準，但在時機和在此之前可能遭受的損失金額方面的判斷也許會極其錯誤。　此外，知道目前處於市場極端並不一定意味著市場正處於轉折點。　因此，您的策略需要考慮每個繁榮和蕭條週期的不可預測性和獨特性。　

 

 

Time in the market vs market timing

Given the above, we think that most investors should keep in mind the following:

1）Don’t try to call tops or bottoms.

2）Remember that highs and lows can go further than is reasonable due to feedback loops.

3）While highs and lows can last longer than expected, remember that they will also come back to the trend at some point.

4）It’s unlikely for two cycles to play out in exactly the same way.

5）Position yourself for opportunities and defend yourself from risks that will naturally occur due to the boom and bust cycle.

6）If you raise a lot of cash for whatever reason, always have a plan to force yourself not to stay out of the market for too long or else you will lose big on opportunity costs.

在市場中的時間vs市場時機

鑑於上述情況，我們認為大多數投資者應牢記以下幾點：

1）不要試圖預測市場高點或低點。　

2) 記住，由於回饋迴路的存在，高點和低點可能會超出合理的範圍。　

3）雖然市場高點和低點的持續時間可能比預期的要長，但請記住，它們在某個時候也會回到趨勢中。　

4）沒有任何週期是以完全相同方式展開的。　

5） 為機會做好準備，並保護自己免受因繁榮和蕭條週期而自然發生的風險。　

6）如果您出於某種原因大幅提高了現金量，請始終制定一個計劃，強迫自己不要退出市場太久，否則您將在機會成本上遭受巨大損失。　

 

 

本文僅代表作者的個人觀點，不代表任何公司的觀點，不應視為投資建議。　

This article reflects the personal views of the author and not any firm’s and should not be viewed as an investment recommendation.

 

編者按：

鑒於市場廣受參與者情緒影響，其波動也因而非理性； 所以市場的高低點基本無法預測。　　

 

 

 

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