With the stock market near its all-time high, it’s common for investors to ask what’s next. Is now the best time to invest or would you just be buying at the top?
Everyone wants to invest money at the right time. It would be unfortunate to put money to work right before a big crash, especially if you missed the warning signs. However, all-time highs are nothing to be feared.
Let’s jump into why you should embrace today’s market.
All-time highs are nothing new
What makes today any different from the past 100 years? The market has continued to advance higher, which means a history of making all-time highs.
We often think that what goes up must come down. Sure, stocks can decline at any time but trying to time market moves is not a good long-term strategy.
What’s next for this market?
Markets are at or near all-time highs approximately one year out of a government-imposed shutdown. Consider these points as you analyze what’s going on.
Companies are doing better than expected.
At the time of writing, we are in earnings season, where publicly traded companies report their financial results from the second quarter. So far, over 80% of companies are reporting earnings that are better than expected.
This is proof that stocks aren’t disconnected from reality. Their financial results are showing an economy emerging from a near shutdown. Consumers are spending money that they couldn’t spend last year, while the companies themselves are in better positions after slashing expenses to survive.
Since investing in stocks means investing in companies, taking a look at how these companies are doing will provide insight into today’s market.
Performance is actually BETTER after being at all-time highs.
What if I said it’s better to invest when the market is at all-time highs?
JPMorgan looked at investing in the S&P 500 on any random day since 1988 versus investing on days when the market closed at an all-time high. Investing at all-time highs was actually better for your returns over one, three, and five-year time periods!
I’m not saying you should only invest at all-time highs, but you get the point. Just because the market is at an all-time high does NOT mean a crash is imminent. On the contrary, you should not be surprised if performance continues to be strong.
The market climbs a wall of worries.
“But what about…?”
There is always something discouraging you from investing. Today I can think of a few things:
- COVID-19’s Delta variant
- Government spending
These things can weigh on the markets, no doubt. But these are just a few of thousands of variables. It is said that the stock market climbs a wall of worries, as illustrated below:
Can you think of a time when there was nothing bad happening in the world? Of course not! Remember, it’s about time in the market, not timing the market.
Investing is an exercise in long-term patience
Trying to time the market is no easy task. When the market is crashing, everything looks ugly, so you don’t buy. When the market is at all-time highs, everything looks too good. You might be asking yourself, “How can it possibly keep moving higher?”
The timing of things is impossible to control or to know ahead of time. If the market is crashing—buy more. If the market is at an all-time high—buy more. Or at least, stay invested.