Let’s take a look at two different issues of timing. First, why is it a bad idea to try to time the stock market? We’ll break that down for you. Then, just when many people were beginning to feel optimistic again, with spring and COVID vaccines becoming increasingly available, global trade was dealt a big blow when container ship Ever Given became lodged in the Suez Canal, forcing ships to reroute around the Cape of Good Hope. What short- and long-term effects will this have?
At the beginning of the pandemic, we mentioned that it is difficult to time the market, especially in volatility moments. Hence, we recommend a diversified portfolio of both stocks and bonds. Now Bank of America has taken the initiative to demonstrate why it’s so dangerous. They put together a chart (below) that quantifies how large the missed opportunities could be for investors who try to perfectly time getting in and out of the market.
The Bank of America analysis looks at the data going back to 1930 and found that if investors missed the ten best days in each decade, the total return would be 28%. Still, if they held steady through ups and downs, the return was 17,715%–certainly compelling evidence that staying the course is more than worth it over the long term.
Staying the course was, clearly, impossible for trading ships last week, as Ever Given blocked the Suez Canal. And while the enormous ship is now freed, the event has many implications for the future of shipping. The canal pilots who were guiding the ship at the time said a dust storm kicked up, and the containers on the ship acted like a sail, blowing it off course, and it’s too soon to say for sure what happened. The ship sails under the Panamanian flag, but the Suez Canal is Egyptian territory, so it’s also unclear which country will handle the investigation through to the end.
While the conclusion of the investigation will surely bring answers, it can’t close all questions. For instance, how significant a role does the climate crisis play in this and other shipping routes? Russia is using this as an opportunity to promote the North Sea Route, which is becoming a more plausible option with rising water levels. Some shippers may decide to continue to go around the Cape of Good Hope in South Africa, which takes several weeks longer but has much lower-risk.
The past 12 months have been one of rethinking many standard practices and procedures worldwide and in many areas of our lives. We wouldn’t be surprised to see shipping change after this event, and it will be interesting to see what effects that has on the economy, politics, and more. In the meantime, buying local where you can will help reduce the wait time on products that might otherwise come from China, which will undoubtedly be slowed down for the next few weeks as blockages on the canal clear and some ships make their way around a very old trade route.
Before we say farewell, we want to take one more opportunity to wish Patti Copley all the best in her retirement. We will miss her tremendously at Obsidian, and we know you will too, and we can’t think of anyone more deserving of a hearty send-off. (Pictured: Patti & husband, Kevin)