Don't let all-time highs scare you.

At this point, I must acknowledge my pieces' repetitive nature. However, each stands to shed light on another aspect of how markets can get you to succumb to trading around, trying to time the market and ultimately leading you to be your own worst enemy. 

If you’ve been following the markets, you’ve noticed that we are hitting all-time highs on a weekly basis at this point. The S&P 500 closed above 5,000, a record on February 9th. Hurray for arbitrary numbers. This is great if you are invested.

It wasn’t long ago that I was writing about how you could not have chosen a worse point in time to go to cash than when the 3-month Treasury Bill began yielding over 5%. Here is a link to that piece if you are interested.

Many people decided to go to cash when yields became attractive. Now they are trying to figure out when to get back into the market. It is like pulling off a band-aid that was super-glued on you. That is one of the most overlooked aspects of being tactical with your portfolio. Not only do you have to get it right once, but you have to get it right the second time as well. 

As the market continues to rise, I am seeing others be hesitant when it comes to investing. This is not surprising. We are now in uncharted territory and people start believing that the music has to stop eventually. And it does… but who knows when? I sure don’t.

I wanted to bring up some market history that I believe serves a great point when thinking about all-time highs in the market. 

After the COVID Crash, the S&P 500 made new all-time highs roughly 6-months later. A “V-shaped” recovery they described it as. Very fitting when you consider the time frame.

People began to think that stocks were incredibly overvalued during this period. Tons of people believed we would retrace to the COVID lows and that the music would stop. Fortunately, that is not how the story goes.

The markets kept ripping higher after they made the first all-time high after COVID. From the day the S&P 500 made a new all-time high it gained over 40%. 

Then 2022 happened. The music finally stopped and we entered a bear market. The funniest thing about how terrible this bear market was, is that at the bottom we were still roughly 5.5% higher than the first new all-time high after COVID.

This goes to show that markets generally go up. What was 2022’s bottom was still 5.5% higher than the first all-time high after COVID. It is much more important that we are consistently investing our money for the long term, rather than picking and choosing when we are investing our money. Even if we do have a few pullbacks, which are inevitable, I always think back to Morgan Housel’s quote: “Every past market decline looks like an opportunity, every future decline looks like a risk.”

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