"All-Time-High" Anxiety? Relax.
The Market Isn't Defying Gravity. It's Just Doing Its Job.
Read Andrew’s Story
Key Takeaways
Market highs are not a red flag. The fear that an up market "must come down" is a myth. All-time highs are a sign that the system is working exactly as it should and are a normal and expected part of a market with a positive expected return.
Market prices aren't arbitrary numbers. A stock is a "perpetual claim ticket" on a company's future earnings and dividends. Its value isn't fighting a force of nature but is based on the collective judgment of its future profitability.
Patience beats panic. Data shows that investing at a market high has generated similar returns to investing after a sharp decline over the subsequent one, three, and five years. Your efforts to improve results by trying to time the market is more likely to penalize them.
Your mind is your biggest opponent. The real challenge isn't the market itself, but managing the emotional responses it triggers. A disciplined strategy is more important than trying to time the market
Time, October 15, 1990 (High Anxiety); Money, August 1997 (Don’t Just Sit There… Sell Stock Now!)
There's a persistent myth in financial news, especially when the market is climbing: that stocks are "defying gravity" and are due for a painful fall. You see the headlines; the ones that talk about the market "heading back to Earth". It's a great story, but it's a terrible metaphor for how markets actually work.
Your investments aren't heavy objects being kept aloft by some mysterious effort. They're not a hot air balloon that must eventually descend. They are, in a far less poetic but more accurate sense, perpetual claim tickets on companies' future earnings and dividends. The value of a stock isn't fighting a force of nature; it's simply a reflection of the market's collective judgment on a company's future profitability. In other words, when stocks hit a new high, it's not a sign that the system is broken; it's a sign that it's working as expected.
Think about it: every day, thousands of businesses are working to innovate, grow, and generate profits. Their success, over time, is what drives market values higher. To put it bluntly, it would be difficult to imagine a scenario where investors freely put money into stocks with the expectation of losing money.
The Data Doesn't Lie.
The idea that you should avoid buying at market highs is a powerful emotional signal, but the data tells a different story. In fact, reaching new record highs is a normal and expected outcome if stocks have a positive expected return. Over the 94-year period ending in 2020, the S&P 500 Index produced a new high in more than 30% of those monthly observations.
But here’s the the real take: a study from Dimensional Fund Advisors shows that purchasing shares at all-time records has, on average, generated similar returns over subsequent one-, three-, and five-year periods to those of a strategy that purchases stocks following a sharp decline:
The numbers don't show a clear advantage to waiting for a drop. All they show is that staying invested pays off over time.
The Real Job of a Financial Advisor
Your biggest opponent isn’t the market; it's your own mind. Our human brains are conditioned to think that after a rise, a fall must follow, tempting us to "fiddle" with our portfolios. But as the data shows, these signals only exist in our imagination, and trying to act on them can hurt your long-term results.
That's where I come in. My job isn’t to predict the market, it’s to help you navigate your emotions and stick to the plan we've built together. It's about ensuring your portfolio is structured to handle the market's ups and downs so you can focus on what really matters: your business, your family, and your legacy.
We’re not fighting the laws of physics. We're embracing the power of a disciplined strategy.
Let's Talk About Your Strategy
If you're a business owner or a successful professional, you've already built your wealth on a foundation of discipline and long-term vision. Let’s make sure your financial plan is built with the same strategy.
Frequently Asked Questions (FAQ)
Q: What is "all-time-high anxiety"?
A: This is the common feeling of apprehension or hesitation that investors experience when stock prices reach a new record high. This feeling is often fueled by the belief that "what goes up must come down" and that a market downturn is imminent.
Q: Should I wait for the market to drop before investing more?
A: The data suggests that trying to time the market in this way is not an effective strategy. A study showed that purchasing stocks at all-time records has, on average, generated similar returns over subsequent one-, three-, and five-year periods to a strategy that purchases stocks following a sharp decline.
Q: How does a financial advisor help with this type of anxiety?
A: A financial advisor helps by providing a disciplined, long-term strategy. My role is to help you navigate your emotions and biases so you can stick to your plan, allowing you to focus on your personal and professional life while your wealth works for you.
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Fiduciary Financial Advisors, LLC is a registered investment adviser and does not give legal or tax advice. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. The information contained herein has been obtained from a third-party source which is believed to be reliable but is subject to correction for error. Investments involve risk and are not guaranteed. Past performance is not a guarantee or representation of future results.
Fiduciary Financial Advisors does not give legal or tax advice. The information contained does not constitute a solicitation or offer to buy or sell any security and does not purport to be a complete statement of all material facts relating to the strategies and services mentioned.
We’ve all felt the anxiety when the market hits a new all-time high. But what if that feeling is based on a media narratives and emotion, rather than logic? We'll use data to explain why the market isn't defying anything, it's just doing its job; and why staying the course on a well-defined plan is more important than timing the market.