Don’t Be Afraid of All-Time Highs in the Stock Market

The S&P 500 last closed at an all-time high in mid-August. We’re only 3-4% away from that number and stocks haven’t done much lately, but many investors become very nervous when they hear about all-time highs in the market. After all, the S&P 500 got cut in half following all-time highs in early-2000 and late-2007. Therefore, the thinking goes that any time stocks reach new highs that disaster can’t be too far away.

History tells a different story.

If we look at daily pricing data going back to 1950, what you see is a ton of new all-time highs in stocks. Here are the numbers broken out by decade:




Some decades have been better than others, but you can see that all-time highs happen fairly frequently. Nearly 7% of all market trading days have seen new all-time highs since 1950.There are definitely decades where new highs tend to cluster together more than others. There were also some lengthy droughts following bear markets where a new high wasn’t seen for some time. There was a seven and a half year period from 1973 to 1980 and another seven plus year period from 2000 to 2007 that the S&P 500 went without seeing new highs. So it’s not like these things work on a set schedule.

It’s also helpful to see how stocks have performed, on average, following historical all-time highs in this period:




The average returns following an all-time high one, three and five years out into the future have been similar to the average gains over this entire period. And stock market returns have been positive the majority of the time when you look ahead over all three time frames. Basically, all-time highs are a natural part of a stock market that has mostly gone up over time. Most of the time markets continue to rise from all-time highs.

Here’s also another way to think about this — since nearly 7% of all days since 1950 have been an all-time high that means that more than 93% of the time the stock market is in a drawdown state from a previous peak. So 9 times out of 10 you are going to be beating yourself up for not selling at the previous high. This is what makes the markets so interesting and excruciating all at the same time. Most of the time you’re in a state of regret.

Having said all of that, every correction, crash or bear market can eventually be traced back to an all-time high level, so they seem dangerous. Unfortunately, before the next bear market occurs, stocks have to peak. Who knows, maybe they already have. But just because there’s an all-time high does not mean that you are guaranteed to call a new market top. It’s never that easy.

You’ll only ever know about the top in hindsight.

Further Reading:
Investing a Lump Sum at All-Time Highs
So You Want to Be a Top-Caller?


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.