Latest Economic Review: Sunpointe Illuminations

Don’t Fear the New Highs

From a psychological perspective, there is often fear when equity markets reach new highs.  The main point is: don’t fret about it. The concern typically is that the stock market is irrationally high and is bound to fall in the near future. Yes, markets do fall, and could do so at any time, but trying to time the markets is impossible. Data shows that new highs should really not be feared. Indeed, there are periods when the economy slows, and markets turn lower; bear markets happen.  But this tends to be temporary; productivity gains and technology innovation have driven equity markets higher for long periods of time. The chart below shows there is a modest difference in returns when investing at all-time highs versus all other dates in the S&P 500 Index for one-, two-, and three-year periods from 1950-2023. Despite the markets reaching new highs, it is important to stay invested because it is impossible to time markets consistently over time. For investors, time in the market is more important than timing the market.  Please reach out to us if you have any questions or thoughts.