This chart shows the 'dangerous' stock market risk Baby Boomers could be facing

By Barbara Kollmeyer

The market doesn't always go back up, says strategist

Stock markets do not always go up over time.

That's something Andrew Adams, strategist at Saut Strategy, is urging clients to think about in a note that published Wednesday. He describes that view that some investors hold as a "dangerous attitude that one can have about financial markets.

"The whole 'it is not timing the market, it is time in the market,' concept is irrational to me and built upon risky reasoning. Such advice works great and is hard to beat in a bull market but can get one crushed during a prolonged bear market," Adams wrote.

Even if stock prices have generally gone up over time in the past, "there have certainly been long stretches when prices go down or sideways," he said. Any investor who rides these periods out fully invested, hoping "asset allocation" will save them in the end, "risks going years or even decades with little to no progress in his or her capital," said Adams, providing the below chart:

For example, investors in 1929 - the year of one of the most famous crashes in Wall Street history - would have likely taken little comfort in knowing the Dow Jones Industrial Average didn't return to its pre-crash high until 1955, he said.

"A poorly timed stock purchase in 1966 would have meant around 16 years of no gains until 1982. And even though the Dow briefly broke out to new highs in 2006/2007 above the previous 2000 peak, it was short-lived and really it wasn't until 2013 that it got going again. Considering a disproportionate amount of the wealth is now held by older Baby Boomers with fewer years to recover losses, many investors probably cannot stand to sit through a decade-plus of no gains should it happen again," he added.

The analyst himself believes stocks are in a process of forming a top and sees odds rising that key highs may already have been made. Four one-sided down days in a row and the market unable to rally even amid oversold readings "makes me think we should now be focused on not losing money rather than on making it," said Adams.

And in the putting-money-where-your-mouth is department, the strategist said he made the "rare step" last month of shifting some of his wife's 401k money to a 90% stable value fund until he can see how this stage of the market plays out.

The S&P 500 SPX closed out its fourth-straight loss on Wednesday, and the longest losing streak since Jan. 4, according to Dow Jones Market Data. The index was barely higher as trading began on Thursday.

-Barbara Kollmeyer

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04-18-24 0947ET

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