Search

X

Is There a Way to Predict the Market?

Tactical Think Tank Group Included 10 Top RIAs

December 4, 2012

Rockford, IL (December 4, 2012) - Savant Capital Management, a nationally recognized fee-only wealth management firm with $2 billion in managed assets, shares the answer to one of the most common investment questions - is there a way to predict the market?

Market turmoil and a suffering economy have forced Americans to look at their finances. Many have lost much of their life savings in the market downtown. People are looking for a quick turn around and are taking the advice of brokers claiming they have the perfect strategy to help investors "win big" in the short-term. The entire industry is built around the idea of beating the market.

Savant became part of a "Tactical Think Tank" (TTT) group in 2009 consisting of 10 top independent Registered Investment Advisory (RIA) firms to study whether or not there was a way to "time the market." The group studied both fundamental and technical factors to see what factors, if any, could help forecast future returns or help avoid market downturns like the one in 2008.

Fundamental factors include price/earnings ratios, dividend yields, inflation, bond spreads, price/book and market capitalization. Technical factors include moving averages, bull/bear indicators, sentiment indications, Bollinger bands and put-call ratio.

The results were disappointing to some members of the TTT, but affirmed Savant's investment philosophy. A few of the technical factors gave correct buy/sell signals in select time periods, but none were consistent enough to implement. Any minor benefits were offset by costs, higher tax and additional risk.

"We concluded that there is nothing we know today that can help predict returns in the short-term. Simply put, market timing does not work," said Brent Brodeski, CEO, Savant Capital Management. "No technical factors could have predicted 2008. However, fundamental factors did show evidence that they can be used to shape expectations regarding long-term returns."

Savant drafted a white paper outlining the firm's experience in the TTT and highlighting the results. The paper titled, "Tactical Think Tank: A Fundamental Answer for Tactical Asset Allocation" can be viewed on the Journal of Financial Planning website at: http://www.fpanet.org/journal/TacticalThinkTank/.

Related Files

Send an email to LaVonne Brown

This is required
This is required Email must be valid
This is required

* indicates a required field

Submit