Investors who pulled their money out of the FTSE 100 following the recent stock market rout have just missed out on the index’s biggest rally in over four years.
The index has increased every day since it bottomed-out last Thursday, closing 8.9% higher than its low point yesterday.
The last time the FTSE had such a successful run was October 2011, when the market rose 9.2% over the same time frame. If markets also rise today, it will be the longest and largest rally since November 2008.
But experts warn markets are currently very volatile, and there’s no certainty that the recent run will continue.
Laith Khalif, senior analyst at Hargreaves Lansdown says: "We’re in a trampoline market right now, where stocks are bouncing around wildly almost every day. Very often the stocks that fall to the bottom of the Footsie on one day rise to the top on the next. The implication is that fundamentals have gone out of the window and sentiment is dominating market movements.”
So while it might be futile to chase returns, recent performance does support recent warnings that trying to time the market is futile, and can be extremely damaging for long term returns.
When markets were in flux in mid-January, Tom Stevenson, investment director for personal investing at Fidelity International said: “It’s difficult to predict the best time to be in and out of the market, especially as the best and worst days very often tend to be bunched together during periods of heightened volatility.”
This was supported by figures from Fidelity showing that someone who’d invested £1,000 in the FTSE-all share 30 years ago would have missed out on half the potential gains if they’d missed the ten best days of the index’s history, costing them £6,922.
At the time, Stevenson advised: “It’s usually more prudent to stay fully invested through market cycles as missing even a handful of the best days in the market can seriously compromise your long-term returns. As the old stock market adage goes; time in the market matters more than timing the market.”
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Biggest four-day FTSE 100 surges of all time:
Source: Moneywise using Yahoo data.