I still vividly remember hitting all-time highs again for the first time following the 2008 crash.
The stock market peaked in October of 2007 before careening into the Great Financial Crisis. Those were scary times.
Those highs weren’t breached again until the spring of 2013.
When it finally happened, many investors worried those new highs would be fleeting. How could you blame them?
The aughts were bookended by two of the biggest crashes in stock market history. New highs were few and far between and everyone was afraid yet another peak was coming before falling off a cliff.
There have been a number of corrections and bear markets since then but there have been new highs aplenty.
Take a look at the number of new all-time highs by decade going back to the 1950s:
The dearth of new highs in the 2000s has been followed by an abundance of record highs these past two decades. That’s a similar set-up investors saw when the terrible 1970s were followed by the wonderful 1980s and 1990s.
In fact, the current bull market is closing in on the number of new highs we saw in that boom.
From the early-1980s through the spring of 2000 at the peak of the dot-com bubble, there were 505 new all-time highs.
Since 2013, there have now been 447 new highs. This truly is an epic bull market run we’re on. And the 2020s are starting to look like the Roaring 20s.
Since 1950, roughly 7% of all trading days have been new all-time highs. The highest percentage of trading days hitting new highs in a decade is the 1990s at 12.3%.1
This decade is far from over but we’ve experienced new highs in the S&P 500 in 13% of trading days.
One of my favorite counterintuitive charts shows that average returns tend to be higher from all-time highs than from all other days in the market (via Exhibit A):
But these numbers make more sense when you consider the new highs tend to cluster during the big, beautiful bull markets.
Despite everything going on this year the S&P 500 has seen 7 new all-time highs.
Eventually one of these highs is going to be THE high that’s followed by a face-melting crash.
But it’s important to remember that new highs are not a bad thing the vast majority of the time.
They happen often, especially during bull markets.
If you’re a long-term investor, new all-time highs are perfectly normal and nothing to be afraid of.
Further Reading:
An Epic Bull Market
1Surprisingly, the second best percentage is the 1960s (9.0%) not the 1980s (7.5%).
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