Trying to time the market is a fool’s errand

Best days often occur during the worst times

The bond market remains undefeated. A 50-basis point spike in the 10-year U.S. Treasury rate over five days was enough for the Trump administration to pause its reciprocal tariffs.¹ Markets expressed relief (or went nuts as if a chicken jockey appeared), learning (hoping?) that there was a pain point for the administration.² As James Carville famously quipped, “If there was reincarnation, I would like to come back as the bond market. You can intimidate everybody.” Personally, I would probably still pick Tom Brady or Bruce Springsteen, but maybe I’m biased as a Michigan alum and a New Jersey resident.

Speaking of Springsteen, do investors still believe in The Promised Land? Being negative on the U.S. has become the trendy (and easy) stance. Policy uncertainty persists, and the longer it takes to negotiate trade deals with much of the world, the bigger the hit to sentiment and investment. If I had a hard time planning for this month’s post, then I can only imagine the challenges currently facing business leaders. Compounding the problem, markets have quickly priced for pain but may not be priced for recession.³

It doesn’t require advanced degrees in economics and international business to recognize the challenges facing the U.S. economy. Tariffs and trade wars result in less optimal economic outcomes, plain and simple. Maybe then it’s more interesting to talk about what could go right. If a crisis is of your own making, then you can also act to provide relief, but is it coming? And could a wave of deregulation re-entice capital to flow into the U.S.?

For now, the challenge is that we’re all operating under the whims of the White House. A reasonable approach could be to diversify portfolios into parts of the market that don’t appear overpriced, including value, mid-cap, and European stocks.⁴ They not only have the potential to outperform on a relative basis if market valuations adjust further but also could benefit from improved policy clarity.

The best market days in the worst times

Timing the market is a fool’s errand. To better understand this, consider how you felt on the morning of Tuesday, March 24, 2020, 11 days after the Covid-19 shutdown began and following a 34% decline in the S&P 500 Index.⁵ Or think about the morning of Wednesday, April 9, 2025, a week after Trump’s “Liberation Day” and following a 19% decline from the S&P 500 Index peak.⁶

Those days were the fourth and third best return days, respectively, for the S&P 500 Index in the past 30 years, a period in which the market produced annualized returns of 10.0%.⁷ The best days almost always occur during the worst times. Missing those best days may seriously erode long-term performance.

If you’re thinking that I’m being too Pollyannaish this time, remember that the 30-year period referenced included the Tech Wreck, 9/11, the Global Financial Crisis, and Covid-19, to name a few.

Finally, it may be confirmation bias but…the market is not expecting stagflation. Rather, the market believes that the tariffs will result in a one-time price shock rather than broad inflation. In fact, the 5-year, 5-year forward inflation breakeven rate, which reflects the bond market’s expectations for inflation over a five-year period starting five years from now, initially declined following Liberation Day and remains below the long-term average (see chart below).⁸ The Federal Reserve will be inclined to respond to any economic weakness as long as long-term inflation expectations remain anchored.

Brian Levitt is a Global Market Strategist at Invesco and cohost of Invesco’s “Market Conversations” podcast.

Notes

1. Source: Bloomberg L.P., April 17, 2025. The 10-year US Treasury rate climbed from 3.99% on April 4 to 4.49% on April 11. 
2. Source: Bloomberg, L.P., April 17, 2025, based on the 9.5% return of the S&P 500 Index on April 9, 2025.
3. Source: Bloomberg L.P., April 17, 2025, based on the price-to-earnings ratio of the S&P 500 Index.
4. Source: Bloomberg L.P., April 17, 2025, based on the price-to-earnings ratios of the Russell 1000 Value Index (17.9x), the Russell Midcap Index (19.5x), and the MSCI Europe Index  (14.2x). The current price to earnings ratio of the S&P 500 Index is 22.6x.
5. Source: Bloomberg L.P. The S&P 500 Index experienced a peak-to-trough decline of 34% from Feb. 19, 2020, to March 23, 2020.
6. Source: Bloomberg. The S&P 500 Index experienced a peak-to-trough decline of 19% from February 19, 2025, to April 8, 2025.
7. Source: Bloomberg L.P., April 21, 2025, based on the return of the S&P 500 Index from April 21, 1995, to April 21, 2025.
8. Source: Bloomberg L.P., April 16, 2025.

Disclaimer

© 2025 by Invesco Canada. Reprinted with permission.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

The opinions referenced above are those of the author as of April 22, 2025. These comments should not be construed as recommendations, but as an illustration of broader themes. This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

Forward-looking statements are not guarantees of future results. They involve risks, uncertainties, and assumptions; there can be no assurance that actual results will not differ materially from expectations. Diversification does not guarantee a profit or eliminate the risk of loss. All investing involves risk, including the risk of loss.

Diversification does not guarantee a profit or eliminate the risk of loss.

All figures are in U.S. dollars.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

All investing involves risk, including the risk of loss.

Past performance is not a guarantee of future results.

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