The Folly of Market Timing: A Call to Millennial Investors in the Fourth Turning

Market timing, the practice of trying to predict and capitalize on market movements, has long been a tempting strategy for investors. However, history and research consistently show that this approach is fraught with risk and often leads to subpar returns. As we navigate through a critical period in history, it's crucial for Millennial investors to understand the broader context of their financial decisions and their potential impact on society.

The Pitfalls of Market Timing

Timing the market is an inherently speculative endeavor. As the Allianz Life survey reveals, 51% of Americans have shifted their investments to more conservative options due to market volatility. This reactionary approach often backfires, as investors risk missing out on crucial periods of exceptional returns.

The biggest danger of market timing is not being invested during critical market upswings. A study analyzing investor behavior found that those who sold 90% of their holdings during a market correction realized a trailing 12-month return of -19.3%, while those who took little or no action returned -3.7% over the same period.

Frequent trading associated with market timing incurs higher transaction costs and potential tax liabilities, further eroding returns.

The Fourth Turning: A Generational Theory of Transformation

To understand the significance of current market trends and the role of Millennial investors, we must consider the broader historical context. The groundbreaking book "The Fourth Turning," written by William Strauss and Neil Howe and first published in 1997, provides a compelling framework for understanding our current era.

Strauss and Howe propose that American history follows a cyclical pattern of four generational turnings, each lasting about 20-25 years: The High, The Awakening, The Unraveling, and The Crisis (The Fourth Turning). According to their theory, we are currently in a Fourth Turning, which began around 2008 and is expected to conclude in the early 2030s.

This period is characterized by institutional upheaval, social and economic restructuring, and a collective challenge that demands a unified national response. During such turnings, generations are pushed into new social roles, with the current Millennial generation positioned as the potential "Heroes" who will navigate and ultimately resolve the current societal challenges.

The Wyckoff Method: A Different Perspective

While market timing is generally inadvisable, understanding market cycles can provide valuable insights. The Wyckoff Method, traditionally applied to stock markets, offers an interesting framework for analyzing other asset classes, including physical gold and real estate.

Gold and Real Estate: Historical Patterns and Future Potential

Both gold and real estate markets have historically displayed patterns reminiscent of the Wyckoff cycle. Let's examine their performance during the last significant bull market:

Gold Market (2001-2011):

• Accumulation Phase (2001-2008): Gold prices increased from around $270 per ounce to about $870, a threefold increase.

• Markup Phase (2009-2011): Gold prices surged from about $880 to a peak of around $1,900, nearly another threefold increase.

• Distribution Phase (2012-2013): Prices leveled out as early investors began taking profits

• Mark Down Phase (2014-2015): Late in, late out. 50% retracement in 12/15 setting the stage for this 3rd bull run.

Real Estate Market (2001-2013):

• Accumulation Phase (1990-2001): Real Estate saw as steady increase during this decade

• Mark Up Phase (2002-2006): Appreciation accelerated aggressively

• Distribution Phase (2007-2008): Subprime mortgage crisis and housing market crash.

• Mark Down Phase (2009-2012): Decline and stabilization setting the stage for another accumulation phase.

Current market conditions suggest we may be approaching a new markup phase for these assets:

1. Accumulation Phase: We are 12 years in for real estate, and 10 years in for gold. Similar to previous cycles.

2. Potential Markup: As economic uncertainties persist; these tangible assets may be poised for significant appreciation.

However, it's crucial to note that while these patterns can provide context, they should not be used as timing signals for short-term trades.

Millennial Investors Embracing Conservative Wisdom

As Millennials enter their prime earning years, they find themselves in a unique position. Like the Greatest Generation during the last Fourth Turning, Millennials are poised to play a critical role in shaping our collective future.

Interestingly, Millennials are already displaying a more conservative approach to investing compared to previous generations. A Fidelity survey found that 42% of Millennials are investing conservatively, compared to 38% of Generation X and 23% of Baby Boomers.

This cautious approach aligns well with the current economic landscape and the responsibilities of the "Hero" generation in a Fourth Turning. By focusing on long-term, stable investments rather than attempting to time market swings, Millennials can build a solid financial foundation for themselves and future generations.

Time in the Market, Not Timing the Market

For Millennial investors looking to secure their financial future and contribute to societal stability, the key lies not in timing the market, but in time in the market. Here are some strategies to consider:

1. Consistent Investing: Regular contributions to a diversified portfolio can help smooth out market volatility over time.

2. Focus on Asset Allocation: Develop a balanced portfolio that aligns with your risk tolerance and long-term goals.

3. Consider Tangible Assets: While not without risks, allocations to real estate and precious metals can provide portfolio diversification.

4. Embrace Your Role: As the new "Hero Generation," your financial decisions today will shape the economic landscape for years to come.

By adopting a measured, long-term approach to investing, Millennials can avoid the pitfalls of market timing while positioning themselves for financial success. In doing so, they'll not only secure their own futures but also contribute to the stability and prosperity of the broader economy – truly embodying the heroic role they're destined to play in this Fourth Turning.

As we navigate through this critical period in history, Millennial investors have the opportunity to learn from past market cycles, embrace the wisdom of conservative investing, and play a pivotal role in shaping a more stable and prosperous future for all.