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Timing the Market? Interesting 52-wk High, ATH, and other data on SPY going back to 1993
Posted on 12/18/23 at 10:58 pm
Posted on 12/18/23 at 10:58 pm
I've seen a few posters suggest that they're nervous investing at market highs, so I started digging into some data using SPY to find out how often the market is at 52 week highs, all-time highs, and "future-time lows". I'm using SPY daily closes using Yahoo Finance downloadable data, and I'm reinvesting dividends for this exercise. I'm also ignoring tax implications, so let's just assume the money is in a tax-qualified account.
Let's start with 52-week rolling highs - by my count there have been 7777 trading days from 1/29/1993 to today, and 7532 trading days for which a 52-week high could exist. Of those 7532 rolling periods, an investment in SPY would have been at a 52W high 932 times, or 12.4% of the time. About 1 in every 8 trading days the investment is at a 52W high.
How about all-time highs? Well, that SPY investment would have been at an ATH 709 times in the 7777 trading days, or 9.1% of the time. About 1 in every 11 trading days the investment is at an ATH.
What I found truly fascinating was what I'll call "future-time lows" - or the chance that the investment was never lower on any future day. To put it another way, if you just picked a random day to invest in SPY, what are the chances that you picked the lowest day from that day forward to today? By my calculations, there were 401 days where the investment never got lower than it was on that particular day, which is a 5.1% chance. 1 in every 20 days is the day to invest in SPY forever.
A reasonable rebuttal might be to say the ATH days don't overlap with the "future-time lows", but that would be incorrect. Of the 709 ATH days, 33 of them were also the lowest the investment would ever be again. On any given ATH, there is a 4.7% chance that your investment will never be any cheaper to buy than it is that day. On any given day that isn't an ATH, there is a 5.2% chance your investment will never be any cheaper than it is that day. That's hardly a real difference. (The last ATH that was also a future-time low was 2/10/2017)
None of that means the market will never be lower than it is today, obviously, but I think it is great food for thought as you decide what is best for your own individual situations. Good luck!
Let's start with 52-week rolling highs - by my count there have been 7777 trading days from 1/29/1993 to today, and 7532 trading days for which a 52-week high could exist. Of those 7532 rolling periods, an investment in SPY would have been at a 52W high 932 times, or 12.4% of the time. About 1 in every 8 trading days the investment is at a 52W high.
How about all-time highs? Well, that SPY investment would have been at an ATH 709 times in the 7777 trading days, or 9.1% of the time. About 1 in every 11 trading days the investment is at an ATH.
What I found truly fascinating was what I'll call "future-time lows" - or the chance that the investment was never lower on any future day. To put it another way, if you just picked a random day to invest in SPY, what are the chances that you picked the lowest day from that day forward to today? By my calculations, there were 401 days where the investment never got lower than it was on that particular day, which is a 5.1% chance. 1 in every 20 days is the day to invest in SPY forever.
A reasonable rebuttal might be to say the ATH days don't overlap with the "future-time lows", but that would be incorrect. Of the 709 ATH days, 33 of them were also the lowest the investment would ever be again. On any given ATH, there is a 4.7% chance that your investment will never be any cheaper to buy than it is that day. On any given day that isn't an ATH, there is a 5.2% chance your investment will never be any cheaper than it is that day. That's hardly a real difference. (The last ATH that was also a future-time low was 2/10/2017)
None of that means the market will never be lower than it is today, obviously, but I think it is great food for thought as you decide what is best for your own individual situations. Good luck!
7
Posted on 12/18/23 at 11:23 pm to slackster
A little something for the bears, I suppose - all of the data above includes a stretch from 4/29/1997 to 3/09/2009 where the market had 0 "future-time lows". If you invested on 4/29/1997, you had less money on 3/09/2009 thanks to the greatest market decline since the Great Depression. It was roughly 3000 trading days and nearly 12 years with nothing to show for it.
However, as discouraging as that may have been, that April 30th, 1997 investment would be up around 837% cumulatively through today, or about 8.5% annualized returns.
However, as discouraging as that may have been, that April 30th, 1997 investment would be up around 837% cumulatively through today, or about 8.5% annualized returns.
This post was edited on 12/19/23 at 7:29 am
Posted on 12/19/23 at 6:24 am to slackster
Great post!
Posted on 12/19/23 at 7:40 am to slackster
This was a solid post. Thanks!
Posted on 12/19/23 at 7:52 am to slackster
Am I the only one who tries to memorize these types of dates for market highs and lows so just in case I ever find myself sucked back in time I could perfectly time the market?
I can’t be the only person who has this daydream.
I can’t be the only person who has this daydream.
Posted on 12/19/23 at 9:08 am to slackster
If you're buying with the intent to sell in the future you are timing the market. The only way to not time the market is to never participate. This is William Sharpe's opinion not my own and he's correct.
Posted on 12/19/23 at 9:33 am to wutangfinancial
quote:
If you're buying with the intent to sell in the future you are timing the market. The only way to not time the market is to never participate. This is William Sharpe's opinion not my own and he's correct.
Sharpe is one of the greatest economists of all time, but I think that’s a very literal interpretation of market timing. I don’t disagree with that take in that sense.
However, if we work under an assumption that equity markets will grow over time, trying to predict the best day to buy or sell is the type of market timing typically discussed here and elsewhere.
Posted on 12/19/23 at 9:44 am to slackster
Fair enough but this is the problem:
There will be a point in time where funds with 2 bps of cash cannot service redemptions from baby boomer retirees. Guessing when is a fools game like you're saying but it is inevitable. We're basically at an inflection point where the overwhelming majority of market participants are non-economic buyers. That means they are also non-economic sellers. Making the assumption that in the future these indices will have compound returns of 7% per annum forever seems like tGOAT greater fools theory in the face of demographics and how that drives capital flows.
All of that is to say that I'm in the same trade/strategy as the sheep
quote:
trying to predict the best day to buy or sell
There will be a point in time where funds with 2 bps of cash cannot service redemptions from baby boomer retirees. Guessing when is a fools game like you're saying but it is inevitable. We're basically at an inflection point where the overwhelming majority of market participants are non-economic buyers. That means they are also non-economic sellers. Making the assumption that in the future these indices will have compound returns of 7% per annum forever seems like tGOAT greater fools theory in the face of demographics and how that drives capital flows.
All of that is to say that I'm in the same trade/strategy as the sheep
Posted on 12/19/23 at 11:02 am to Drizzt
quote:
Am I the only one who tries to memorize these types of dates for market highs and lows so just in case I ever find myself sucked back in time I could perfectly time the market? I can’t be the only person who has this daydream.
Same. Here are some dates and simply mind-blowing numbers.
In August 1993 I could articulate a sentence pretty well. I’d tell my dad to open a traditional IRA with $1000 and buy MSFT. On 5/31/1997 I’d tell him to sell and buy AMZN. He’d have $6,977 by then. In January 1998 I’d tell him to convert to Roth and he’d have to pay taxes on the $22,875 at that time, preferably out of his pocket.
On 3/31/1999 he’d sell AMZN and buy NVDA with the $400,452 he’d have. On 12/31/2001 he’d sell NVDA and buy AMZN with $5,074,810. On 10/31/03 he’d sell AMZN and buy AAPL with $25,528,830. On 5/31/08 he’d go to cash with $420,969,660. On 3/09/09 he’d buy NVDA and cash out on 9/30/18 with $11,552,400,000 to buy Dollar Tree. On 12/31/18 he’d sell DLTR to buy NVDA with $12,790,000,000. On 11/30/21 he’d sell NVDA to buy XOM with $126,010,000,000. On 10/31/2022 he’d buy NVDA again with $240,600,000,000. Today he’d have $877,100,000,000 in his Roth IRA and be the wealthiest person in the planet by a factor of nearly 4.
Remember those dates.
Posted on 12/19/23 at 11:19 am to Drizzt
quote:
Am I the only one who tries to memorize these types of dates for market highs and lows so just in case I ever find myself sucked back in time I could perfectly time the market?
I can’t be the only person who has this daydream.
I do. Just in case.
Posted on 12/19/23 at 12:03 pm to slackster
It's an interesting exercise but reality depends when you enter the market. That particular 30 year period buffers results in a favorable way.
Posted on 12/19/23 at 1:34 pm to Enadious
quote:How so?
It's an interesting exercise but reality depends when you enter the market. That particular 30 year period buffers results in a favorable way.
S&P 500 was created in March 1957 and has returned approximately 10.2% annualized since then. The time frame referenced in the OP had annualized total returns of around 9.9%.
Posted on 12/19/23 at 1:48 pm to slackster
I'm always afraid to sell anything in my IRA's.
Some great buys and some down right awful ones.
Some great buys and some down right awful ones.
Posted on 12/19/23 at 11:09 pm to Billy Blanks
This tells me to simply buy and DCA going forward and let the chip lie where they may.
Posted on 12/20/23 at 7:30 am to wutangfinancial
quote:
The only way to not time the market is to never participate.
Meh. DCA for retirement investing cannot be considered "timing" the market. Now, is transitioning out of equities as you approach your retirement window and minimizing downside risk in that fashion a form of "timing"? Sure. But it isn't fair to compare it to the practice of folks sitting at their computer screens, shaking bags of chicken bones, reading 8Ks, 10Ks, listening to earnings calls, reading animal entrails, analyzing price charts, etc., trying to get an edge on broader index performance.
Buy and hold isn't dumb. Dollar cost averaging isn't dumb. Minimizing downside risk isn't dumb. Trying to "time" the market is dumb unless it is all you do and you're very good at it. That is true for very, very, very few folks.
This post was edited on 12/20/23 at 7:31 am
Posted on 1/20/24 at 11:59 am to slackster
Bump given the S&P 500 ATH close.
Posted on 1/20/24 at 2:00 pm to slackster
That stat is why I intend to stay very heavy in the market through my (hopeful) retirement to death.
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