Long-Term Trend
Great news for investors – the S&P 500 stock index is once again back up and now at its highest point ever. Although stocks have gone up significantly reaching many new highs in the past 10, 20, 30 and 40 years, reaching new highs hasn’t happened in over two years, so it’s a big deal. Historically what happens next?
Why All-Time Highs Can be Good
You might think a record high means the market has peaked, however history suggests that all-time highs are often followed by (you guessed it) new all-time highs! Market highs generally occur when markets are strong and strong markets can keep going up.
History Fact Check: What Next After New Highs?
In the past 30 years, the market has seen over 600 all-time highs. Impressively, the average return in the year following these highs is +15.0%! This is actually better than the average 1-year return of +11.4% all other times. So, generally the new highs did not mark the end of an uptrend but actually marked the beginning of a pretty good year ahead.
What Does This Mean for You?
Although we recommend consistent investing, rather than guessing and stressing about marketing timing, the data and history gives added comfort about beginning or adding to your investments. Remember, even when the market has dipped, it has always eventually recovered and gone on to reach new highs. The key takeaway? Start investing early, keep investing regularly, and stay diversified!
Source:
YCharts. The S&P 500 Index data as of 01/22/1993-01/19/2024. Record index high occurred on 01/19/2024.