Volatility Equities Chart

Why Market Timing Feels Right—and Often Goes Wrong

28 January 2026
2 min read
How Unstable Markets Can Test Equity Investors
A conceptual depiction of rising and falling markets in a line chart, punctuated by statements that reflect common investor reactions to directional shifts.

For illustrative purposes only.
Source: AllianceBernstein (AB)

Stock market volatility has a way of triggering powerful emotions. Rising prices foster confidence. But when markets fall, fear can take over, leading investors to make decisions that may undermine long-term returns.

Behavioral reactions to market dynamics tend to follow familiar patterns (Display). Market gains make investors feel “safe” and want to buy more. Yet in declining markets, painful losses may prompt investors to sell with the intent of reentering before a recovery. Unfortunately, investors who sell and miss the rebound’s inflection point will have locked in losses. History and academic research show that attempts to time markets are rarely successful—and can be costly.

Prepare Portfolios for a Bumpier Long-Term Journey

Market timing may feel intuitive because short-term market moves seem obvious in hindsight. In reality, markets are driven by uncertainty and incomplete information, which often lead to emotional decisions.

That’s why it’s best to prepare for volatility when markets are calm. Building resilience into a portfolio before turbulence strikes can make the difference between staying disciplined and making counterproductive decisions in choppy conditions.

Recent experience underscores this point. Even though equities rose sharply in 2025, the steep April downturn tested investors’ conviction. Those who stayed invested were rewarded for their discipline as markets rebounded rapidly. In 2026, the AI buildout, macroeconomic concerns and geopolitical tensions suggest the road ahead won’t be smooth.

Defensive Equities Help Maintain Discipline

So what can investors do? Consider allocating to defensive equities—in the US market and around the world—to help cope with uncertainty. By reducing losses in falling markets, a defensive portfolio can alleviate the pain of losses that may affect critical decisions. And by losing less, a defensive portfolio is better positioned to compound market gains during a recovery. In fact, some of the strongest market gains often occur shortly after periods of stress, and missing those rebounds can have an outsized impact on long-term outcomes.

Preparing for volatility today—rather than reacting to it tomorrow—can help investors stay invested through market cycles and navigate uncertainty without sacrificing long-term opportunity.

The views expressed herein do not constitute research, investment advice or trade recommendations, do not necessarily represent the views of all AB portfolio-management teams and are subject to change over time.