The stock market has reached new all-time highs, a bullish sign according to historical data. Despite concerns about high valuations, market concentration, and geopolitical risks, the evidence does not support the pessimism surrounding the market’s performance. History shows that new highs are a regular occurrence during bull markets.
The Dow Jones Industrial Average made 492 new all-time highs from 1982 to 1999 and 279 from 1952 to 1965. Investing during these periods of record highs has statistically provided better returns than investing randomly on any other day in a market cycle.
Stock market optimism reinforced by data
In 2014, discussions about selling at all-time highs were prevalent, but doing so would have led to missed opportunities. Pete Mallouk, a financial expert, noted that since its inception in 1957, the S&P 500 has hit 1,231 all-time highs, emphasizing that investors should not fear new highs. Psychologist Paul Ekman’s concept that emotions can change how we perceive the world and interpret others’ actions is relevant to investing.
Confirmation bias is common in markets, with bears focusing on negative data and bulls on positive data. Investors are encouraged to consider the historical evidence and not let unfounded fears influence their investment decisions. While caution is always warranted, the data suggests that betting against all-time highs may not be the most prudent approach.
