Should All-Time Highs Make You Nervous?
Good morning!
The stock market has been bumping up against all-time highs again lately, and we've seen several new highs so far this year.
And like clockwork, that brings the questions: Should I be worried? Is a crash coming? I've got cash to invest - should I really be buying at the top?
It's a completely natural reaction. But here's the short version: an all-time high, by itself, isn't a reason to do anything differently.
Let me show you why.
All-time highs are normal
Since 1950, the S&P 500 has hit over 1,300 all-time highs โ an average of more than 17 every single year. They're not a warning sign. They're what you'd expect from a market that tends to climb over long stretches of time.
The reason they feel significant is that "stock market hits record high" makes for a good headline. "Markets behaving exactly as expected" does not. ๐
What actually happens after a record high?
This is the part most people get backwards.
Dimensional Fund Advisors looked at nearly a century of US stock market data (S&P 500 index, 1926โ2025) and compared returns after months that ended at a record high vs. returns after any month. If highs were dangerous, you'd expect worse returns afterward.
Instead, they were nearly identical:
This is, of course, on average. While there have been times of decline, and we don't know what the future will hold, this helps us to have reasonable expectations.
As it turns out, all time highs tend to be followed by...wait for it...more all time highs.
There's a common saying of "what goes up must come down", but there is no gravity with investments like in the physical world. A high has not meant, historically, that a decline is imminent - contrary to the belief of many.
But what about big drops?
Fair question. RBC looked at how often a correction of 10%+ followed each all-time high since 1950 for the US market:
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Only 9% of the time one year later
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Even rarer at three years
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And over any 5-year window following a high, the S&P 500 has never finished down more than 10%
Now, declines absolutely happen. A 10% pullback shows up about once a year on average, and bigger drops come around every few years.
That's simply part of investing, and it's the price of admission for the long-term growth you're after. But a new record high is not a flashing signal that one is coming.
So what should you actually focus on?
Not the headlines. Focus on the things that are within your control:
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Improving your practice, clinical skills, and income potential.
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A long-term mix of investments that fits your goals, time horizon, and stage of practice ownership
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Staying invested โ taking less action is usually the better move
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Your savings rate and how you're using your practice and personal cash flow
That last one is where your real leverage is. Markets will do what markets do. Your habits and systems are the part you actually get to control.
People get just as nervous when prices are falling as when they're high. There's always a reason to wait. The investors who do well are usually the ones who stop looking for one.
Have a great weekend!
Want to talk through your own investment plan? Reply to this email or schedule an intro call.
โClick here to schedule your free consultation. We can look at what's on your mind and figure out if there's a better path forward for your situation.
Have a great weekend!
Evon Mendrin, CFPยฎ, CSLPยฎ
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