All-Time Highs in the Stock Market are Perfectly Normal

“If you think the market’s “too high” wait ’til you see it 20 years from now.” – Nick Murray

In late July the S&P 500 closed at an all-time high level of roughly 1,988. It was the 26th all-time high based on the closing price for the S&P in 2014 alone.

Because we’ve seen all-time highs in 2000 and 2007 both lead to 50%+ declines in the stock market, the phrase ‘all-time highs in stocks’ has turned into one of the scariest headlines investors want to read these days.

But all-time highs are perfectly normal in the stock market. Since 1950 there have been over 1,100 new all-time closing highs in the S&P 500. That’s 6.8% of all trading days or roughly 1 out of every 15 days the market is open that it’s closed at a new high level.

All-time highs also tend to cluster around one another. Here are the number of all-time highs since 1950 broken out by by decade:

ATHs by decade

Over 70% of all-time highs occurred during the 50s, 60s and 90s. There were also some long dry spells as the 70s and 00s constitute only a small fraction of new highs. These were the three longest droughts from peak to peak between all-times highs since 1950:


Granted these are only price levels. They don’t include reinvested dividends to see things from a total return perspective. But it’s worth noting that after the biggest market crashes since World War II it’s taken a number of years to break-even on a price basis.

There are two ways to look at these lengthy periods between peaks: (1) buy and hold requires patience if you have a mature portfolio or (2) market crashes offer long stretches of time for net savers to put money to work at lower prices. Perspective matters in the financial markets.

Just because all-time highs happen on a regular basis doesn’t mean stocks can’t or won’t fall. They absolutely will at some point. There are any number of reasons for stocks to decline. But stocks don’t have to crash merely because they hit all-time highs.

It’s perfectly normal.

Subscribe to receive email updates and my monthly newsletter by clicking here.

Follow me on Twitter: @awealthofcs

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. The New Normal commented on Aug 20

    Wouldn’t a better analysis show what the future return of stocks are (vs long term avg) after a bunch of new all-time highs are made in a short period of time?

    • Ben commented on Aug 20

      Would be interesting. Feel free to share if you run the analysis.

  2. A few more Wednesday Reads – 8/20/2014 | Finance and Physics commented on Aug 20

    […] Today’s lesson “stock prices at all-time highs imminent crash.” At some point, you figure out that there is no such thing as predicting the future, but that will not stop anyone from guessing. That’s for the casino people. (A Wealth of Common Sense) […]