Terry Smith: Even If You Had Perfect Foresight You Could Not Predict The Market’s Reaction

In his recent Fundsmith Annual Shareholders’ Meeting, Terry Smith discussed market timing, and even if you had perfect foresight it would still be impossible to predict how the market would react to events. Here’s an excerpt from that meeting:

Smith: An awful lot of people talk about so called ‘market timing’. Whether you can take your money out, miss dips in the market and put it back in at a low and gain from a rise in the market. Foresee events, and profit from that. I don’t think that’s possible.

I’ve certainly never met anyone who can do it, and I know I’m not capable of doing it. And I think what last year’s events illustrate are, even if you had perfect foresight it’s impossible because you don’t know how the market will react. Even if you could foresee the pandemic and the downturn in the economy would you be able to predict what the market would do? I don’t think so!

There’s an old joke, a story about a man who wanted to become rich and what he prayed for was that one day he’d be in the street and by some miracle he would find next year’s newspaper, and be able to act on it. And of course the punchline of the story is for him to become rich he would have to have the stock price page in the newspaper, not the news page because the news page on its own would tell you events, it wouldn’t tell you how the market will react.

You can watch the entire presentation here: