Some Perspective on Recent Record High Closes

All three major stock market indexes hit a record on the same day recently on March 21st. Those three indexes are the S&P 500, the NASDAQ, and the Dow Jones Industrial Average. This was the first time all three indexes hit a record high on the same day since November 8, 2021. You might therefore be wondering about what this means for stock prices going forward. I know that some of you are wondering whether things can continue to go this well. And I also know that our human brains sometimes like to say very unhelpful things to us like “what goes up must come down”.

But let’s be clear, stock prices can always go down for any number of reasons. Another war, terrorist event, a bad inflation report, or some other unforeseen event could cause disruptions in markets. But when indexes hit record highs, it is not a bad or bearish signal by itself. In fact, it’s quite normal that markets and indexes repeatedly reach record highs during bull markets.

Brian Levitt from Invesco wrote in January: “The S&P 500 has hit 1,176 new highs since its 1957 inception.” (The total is obviously higher now.) He goes on: “That’s the equivalent of a new high every…14.3 days. History suggests that investors should expect the market to ascend to many new highs over their lifetimes, even if the path isn’t always a straight one.”

Admittedly, even I was surprised by this little factoid of a new record high – on average – every 14 days or so. We obviously had a difficult period during 2022 and much of 2023 where the S&P 500 went 104 weeks or about 728 days (approximately 500 trading days) without hitting a record high. But now our patience has been rewarded.

Speaking of averages, please remember that the S&P 500 – on average – “corrects” or goes down about 14% every year, even though it ends up positive about 70% of the time at the end of each year.[1] Corrections are healthy and normal, and I would anticipate some type of healthy correction eventually even if this bull market persists.

Bottom Line: There is a lot to like in this bull market. Nobody knows how far it runs, but a string of record-high closes doesn’t necessarily mean that stocks are overvalued. As always, stay patient, stay disciplined…and stay invested.

[1] See J.P. Morgan’s 2024 Guide to the Markets, page 14.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
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