You didn't read the article. you just listed the inflation rates for 2021 and 2022, and blamed Biden.
Timing the market” is a loose term that means trying to cut your exposure to the market before it falls and raise it before it rises. It covers a variety of strategies, tactics and time frames.
At the other end of the spectrum you have people who are moving slowly and thinking long term. They aren’t ducking in and out over days, weeks, or even months. They may raise or lower their exposure to the stock market from one year to the next, depending on whether they think stocks (and bonds) are overvalued compared with their fundamentals, or undervalued, or in response to economic or political risks.
People doing this may not even think of what they are doing as “timing.” They may actually object to the term, with its disreputable connotations of day trading. But anything involving cutting or raising stock market exposure temporarily, in the hope of profit and in response to market or economic conditions, is a form of timing.
It’s this latter type that GMO is talking about.
Ben Inker, GMO’s co-head of asset allocation, and asset allocation team members James Montier and Martin Tarlie, have just published a paper that is likely to ruffle plenty of feathers. “Investing for Retirement III: Understanding and Dealing With Sequence Risk” argues that retirees can lower their risk of running out of money by including some market timing in their so-called “glide path,” meaning the path by which their portfolio is expected to evolve as they move through retirement.
Right now, the retirement industry’s typical advice is that retirees should pretty much ignore temporary market conditions, and follow a predetermined optimal “glide path” from risk to safety, stocks to bonds, as they age. (There has been a lively debate about what that glide path should look like, but that’s another story.)
But as the GMO trio point out, these strategies and glide paths all rely logically on an unspoken assumption: That stocks and bonds are priced “fairly,” or (in layperson’s terms) “about right.” This is actually the great unspoken assumption underlying a lot of today’s financial advice: The “expected returns” and “risk” (i.e., volatility) of various assets at any given point is simply based on their average returns and volatility from the past 20, or 50, or 100 years
This is where Inker, Montier and Tarlie come in.
They argue that retirees can lower their risk of running out of money by “buying low and selling high.” When the stock market is expensive in relation to fundamentals, they argue, retirees should be adjusting their stock exposure downward. And when the stock market is cheap, they argue, retirees should be ramping their stock exposure up.
Such advice tends to run counter to modern conventional wisdom, which generally advises people to pick an asset allocation based on our individual circumstances and risk tolerance, and adjust it only as those change.
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