Financial Planning Fridays #73: All Time Market High

The S&P 500 just reached a new all-time high!

While this is an exciting time, this often coincides with many purported experts clamoring that the market is now severely overvalued, and you must get out before the next major market decline. This is often matched in enthusiasm by an equal number of experts clamoring that the market is just getting started and you must get in before it’s too late.

As usual, we will not let this impact our decision-making one way or another as we navigate this next chapter of the market in 2024.

And, while market forecasters aren’t good for much else than filling the open airtime on CNBC, it did make us start to wonder: What has happened after all the other previous new market highs?

This chart from RBC shows the number of all-time highs made each decade since 1950.

As you can see, new market highs actually happen a lot – in fact an average of 163 times each decade…163 times each decade! Wow. This means the market made a new all-time high once every 15 trading days! Great news. But…let’s give the doomsayers a chance at it and look at how often the market has had a significant decline after setting a new all-time high next.

After a new high, the market was down 10% or more 6.5% of the time 1 year later, less than 2% of the time after 3 years and has never been down 10% after 5 years.

These new all-time market highs should validate your previous decision to keep your long-term funds invested in stocks. You are now being rewarded for remaining optimistic and taking advantage of all the downturns that occurred since the previous record high. 

And, history shows us that we likely have a lot more to look forward to!

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