MARKET TIMING DURING A TIME OF AMBIGUITY

An increase in the nominal anchor Monetary Policy Rate (MPR), in the stock market have a normative level. Speculators sell their shares and move their money to the market to take advantage of rising interest rates when there is an increase in the MPR. As a logical consequence, when the MPR declines, speculators leave the money market and go to the capital market.

Despite the market technical analysis, or a random walk model, the market occasionally moves in a different direction from what the analyst had. MPC committee of the Central Bank of Nigeria (CBN) hiked the MPR to 16.5 percent, this played out on the Nigerian Exchange Limited (NGX) in November 2022.

In this scenario, NGX gained more than 20 percent.

It was ascribed by top experts to heartening company earnings and high hopes for a new administration following the forthcoming presidential election.

The current scenario is that whoever wins out of the three leading candidates will be pro-market and run an economy based on the private sector.

These and other problems are present in each of the three leading candidates' manifestos. NGX is now in a bullish trend as of the time of this writing. The market's performance is nothing esoteric. The idea that the market has a built-in self-correction mechanism has only been proven by this.

Every day, the economy of Nigeria spirals further into gloom. The World Bank forecasts no growth in 2024 and has reduced Nigeria's economic growth from 3.1 percent in 2022 to 2.9 percent in 2023. Although the forecasts may not be entirely accurate, they indicate a dismal and unstable economic prognosis for Nigeria this year.

In addition to issuing warnings to nine Nigerian banks, including Access Bank Plc, Zenith Bank, First Bank of Nigeria Limited, Guaranty Trust Bank, and First City Monument Bank (FCMB), the international rating agency Moody's Investors Service has lowered Nigeria's bonds. By the end of January 30, 2023, the external reserve has decreased by $64 million, from $37.08 billion to $37.01 billion. Due to a lack of Naira and increased demand for foreign currency, the Naira has decreased in value to N462 to the US dollar. Investors need strategic investment guidance now more than ever to avoid getting their fingers burned. Their stockbrokers must be contacted.

Market timing, which is the act of transferring funds across asset classes to optimize returns and minimize risk, can be used at this time to profit from stock investment. It is a strategy of anticipating when to buy and when to sell stocks in order to reduce risk.

They employ tools like chart, economic forecasts, and even their gut impressions to decide when a transaction is best executed.

It can increase earnings significantly, reduce losses, and control volatility. It counter that it takes time and necessitates daily market monitoring. Higher transaction costs and tax disadvantages from short-term capital gains, and the danger of timing when to enter and quit the market are all possible consequences.