Fisher Investments Reviews What All-Time Highs Might Mean for Investors

Looking Past the First All-Time High

Stocks recovered from 2022’s downturn earlier this year and have hit numerous all-time highs since. Some investors may have been tempted to sell at that point—a phenomenon we call “breakevenitis”—but a large portion of a bull market's gains typically come after that first all-time high. As demonstrated in Exhibit 1, since 1940, bull markets have lasted an average of 45 months and returned an average of 118% after markets hit new highs (green regions)—hitting many new all-time highs along the way, as we’ll discuss below.

Exhibit 1: S&P 500 Bull Markets Since 1940

Source: Global Financial Data, as of 7/24/2023. S&P 500 Total Return Index returns, daily, 1/1/1940 – 1/3/2022

Bull Markets Are Full of All-Time Highs

While investors can be reluctant to invest around new all-time highs, broad stock market averages have gone on to reach many new all-time highs. In fact, since the 1950s, the S&P 500—which has a longer price history than global stocks—has reached new highs over 1,290 times!*

Exhibit 2 looks at this dynamic in a slightly different way—using global stocks and monthly highs. As one might expect, all-time highs (yellow dots) cluster in bull markets and most were followed by further highs. In fact, after hitting a new high, global stocks have risen over the next twelve months 78% of the time.

Exhibit 2: A Long History of New All-Time Highs for Global Stocks

Investing At All-Time Highs Often Doesn’t Hurt

At Fisher Investments, we typically discourage investors from trying to time the market—particularly when using arbitrary price levels as an indicator. Market timing can have an impact on an investor’s returns, but stocks are highly volatile in the short term and waiting for a “better opportunity” often backfires. Exhibit 3 shows the “consequences” of investing at an all-time high. Perhaps counter-intuitively, the returns when investing at an all-time high (yellow bars) aren’t all that different than investing on any given day in the market (green bars).

Exhibit 3: Average Forward MSCI World Total Returns, January 1970 – May 2024

Source: FactSet, as of 6/18/2024. MSCI World Total Return Index, monthly, 12/31/1969 – 5/31/2024.

All-time highs are not predictive. They are backward looking, telling you only where stocks have been. To assess whether any high is the bull market’s last requires you to look past index price levels to investors’ expectations and how those square with what economic and political conditions look likely to mean for earnings over the next 3-30 months. In our view, handwringing over all-time highs is just another brick in the wall of worry that stocks love to climb.

*Source: FactSet S&P 500 Index Price Level, daily from 1/1/1950–6/25/2024.

Want to Dig Deeper?

In this article, we reviewed what all-time highs mean—and don’t mean—for markets. For more analysis on why fears over all-time highs are overblown, you can read Fisher Investments’ MarketMinder article, “What to Glean From the S&P 500’s New Record High.”

A Closer Look at What Lies Ahead Following New All-Time Highs

To learn more about what new all-time highs mean for markets, watch this video from Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher. In the video, Ken also discusses why breakevenitis can be dangerous for your portfolio and what’s ahead for stocks.

For more market insights from Fisher Investments, read our latest articles.

Investing in securities involves a risk of loss. Past performance is never a guarantee of future returns. The results for individual portfolios and for different periods may vary depending on market conditions and the composition of the portfolio. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice.