After more than a two-year wait, the U.S. stock market has finally reached new highs. As an investor, you may be wondering: Is now the right time to buy? Although buying at peak prices may seem counterintuitive, the data may convince you otherwise.

Why All Time Highs Are Bullish
All-time highs are not uncommon. In fact, since 1950 the U.S. stock market has set 1,431 highs along the way to its current level.

Those who avoided these highs in the past missed out on significant growth. Historical data shows that all-time highs tend to follow all-time highs. As you can see, there are long periods of time where markets can trend upward.

Should you build an all-time high?

Returns Following New Highs
The bear market of 2022 was certainly challenging, but when compared to the most significant downturns of the past 70 years, it was relatively average.

The good news is that U.S. stocks have historically performed well following bear markets. The average 1 year, 3 year, and 5 year returns following new highs were +14%, 30%, and +62%. The only other time when new highs were reached and then followed by another bear market was in 2007.

Bottom Line
All-time highs are exciting but they shouldn’t be a cause for concern. It’s fairly common for new highs to occur in clusters. The key to success is to stay focused on your investment plan and not be overly swayed by headlines. By maintaining this disciplined approach, you’ll be better positioned to benefit from the rewards of long-term investing.

George Maroudas

George Maroudas

Twitter @ChicagoAdvisor

Disclaimers/ Sources:

“Should You Buy at All-Time Highs?” chart from George Maroudas. Data from YCharts as of 1/24/24. 

Returns after making new highs chart from George Maroudas. S&P 500 total return data from the start of the month the new high was made. Data from Robert Shiller

Stock investing includes risks, including fluctuating prices and loss or principal. This information is not intended to provide specific advice or recommendations about any stock nor is it intended to be a recommendation to buy, sell or hold any stock investment. We suggest speaking with your financial professional about your situation prior to investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.