Should you Buy into the Market at All-Time Highs? What history tells us.

Matt Corthell |

2024 has been off to a hot start on the back of AI stocks advancements as well as a general broadening out of the market. As of March 26th, the S&P 500 has set 20 record highs in 2024. Many investors worry that all-time highs occur right before a large downturn. This begs the question, is the market too high? What has happened in the past? Let’s look back on the market from 1970 to now.

There were essentially 3 protracted market downturns that took over 1,200 market days to recover:

  • 1970s Bear Market (lasted 1897 market days)

  • Tech Bust in the early 2000s (lasted 1802 market days)

  • Global Financial crisis from 2007 to 2013 (lasted 1375 marked days)

Why 1,200 days? It happens to coincide with the major market events since the 1970s.

 

A graph showing the growth of a stock market Description automatically generated

Chart generated from S&P 500 daily price data downloaded from Yahoo Finance

 

Look at the above chart.

You will see from early 1973 a peak that was not passed until early 1980, ouch! After crossing to its first all-time high in 1980, the market went on to cross 504 all-time highs until the market peaked at the top of the tech bubble.

It took 1,802 market days for the market to pass the tech bubble highs. This period was met with far fewer record closes. Only 9 record highs were set in 2007 before the onset of the Global Financial Crisis.

Despite the severity of the financial crisis, it took 1,375 market days to eclipse the highs set in 2007 and while we faced a sell off from initial onset of COVID followed by the post-COVID inflation bust, neither of these declines were long lasting. We have not had a protracted downturn of over 1,200 days since the Global Financial Crisis. Despite the quick selloffs related to covid, we have notched over 366 all-time high closes since the Financial Crisis.

I also wanted to look at the data a different way. What percentage of the time is the market at all-time highs? In the data reviewed:

  • The market has hit an all-time high, on 7.01% of market days. This implies 1 out of every 14.26 market days the market has hit a new high.

  • The market has been within 5% of all-time highs on 43.85% of market days. This implies 1 out 2.28 market days the market has been within 5% of all-time highs.

  • The market has been within 10% of all-time highs on 57.48% of market days. This implies 1 out 1.74 market days the market has been within 10% of all-time highs.

The data implies that if you are going to invest for a decent length of time, it’s highly plausible you may be within striking distance of the all-time highs on a fairly regular basis. We can all be so lucky!

While future returns are never guaranteed, all-time highs have been broken for quite some time before a nasty sell-off occurs. The timing has been long and short between such events. Since the start of 1970, the market has made 959 all-time high closes!

Investors should always be braced for a nasty sell off while simultaneously be prepared for new highs while using other financial planning techniques, like an emergency reserve, to weather these harsher periods. 

There is far more that goes into a personal financial situation than investments. If you would like one of our advisors to review your situation, please use the following link.

Wishing you well! 

 

The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security or the execution of any strategy. The decision to review or consider the purchase or sell of any security or strategy should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.