Markets have an odd way of stirring up anxiety when they’re only delivering good news. U.S. stocks have recently been notching fresh all-time highs, and while that sounds like reason to celebrate, it often has the opposite effect. For some, “record high” feels like “too high,” as if the market has already run its course and the only way forward is down. Add in headlines about lofty valuations, questions about the Federal Reserve’s next move on interest rates, and a steady drumbeat of government-shutdown-related uncertainty, and it’s easy to see why some investors hesitate to put new money to work in accordance with their plan.
It can be tempting to view holding off on additional investment as the safe move, especially when it comes with the peace of mind from knowing you haven’t just bought at a new high. But is that really safety, or just a different kind of bet? Choosing not to invest is still a decision—a wager that markets will stumble soon enough to justify sitting out. But what if they don’t? What if, as has so often been the case, stocks continue to climb after reaching new highs? In that scenario, the risk isn’t just short-term volatility; it’s the quieter, compounding cost of missing out on the very returns your long-term plan depends on.
When exploring this question with our clients through the lens of fiduciary advice, we ground our guidance in evidence rather than headlines or hunches. History provides clear conclusions and points to important and actionable insight:
- New highs are normal. They are a regular and expected part of healthy, long-term markets.
- Big drops aren’t automatic. Large corrections right after highs are far less common than our instincts suggest.
- Returns after highs hold up. Forward returns have historically been just as strong as those from any random starting point.
- The real danger is missing out. Staying on the sidelines risks losing the best days that fuel long-term compounding.
New Highs Are a Regular Occurrence
If you only followed financial news, you might think every new high is a flashing warning sign. Headlines often frame records as speculative bubbles or warn of imminent corrections. But the data tells a different story. New highs are not rare—they’re a natural feature of long bull markets. In fact, investors see dozens of them during extended upswings. Rather than a sign of danger, new highs are better understood as mile markers along the way to long-term growth.
New highs aren’t rare—they’re part of normal market progress.
Source: Barclays Private Bank
Are Market Drops More Likely After New Highs?
It’s easy to assume that a steep decline is waiting right around the corner after the market hits a record. The belief that a decline must follow a new high usually manifests in two ways. For some, it’s the worry that buying now will mean bearing the full brunt of an inevitable downturn. For others, it’s about holding out for a better deal, keeping “powder dry” in hopes of getting in at lower prices. But history tells us both instincts are misleading. Large corrections immediately after highs are relatively uncommon, and when they occur, recoveries are often swift and hard to time. In both cases, the attempt to sidestep risk often leads to missing the very progress that creates long-term wealth.
Pullbacks happen, but large declines right after market highs are the exception—not the rule.
Source: RBC Global Asset Management
Do Returns Weaken After New Highs, or Is Now Still the Right Time to Invest?
It’s natural to wonder if a record high means the gains are already gone, that all the good news is priced in, or that you’ve simply missed your chance. The data, however, tells a different story. Over nearly a century, the S&P 500’s forward returns after new highs have been virtually indistinguishable from returns on any other day. Often, they’re even stronger. That shouldn’t come as a surprise: at all points in time, markets are priced to deliver positive expected returns. For investors asking when to put money to work, history’s answer is clear—there’s no time like the present.
Buying at a high hasn’t meant poor returns; history shows returns have been just as strong as investing on any other day.
Source: Dimensional Fund Advisors.
The Real Cost to Investors: Missing the Market’s Best Days
While the media emphasizes the drama of market peaks and corrections, the far greater risk rarely gets the same airtime: missing the market’s best days. These bursts of strong performance often occur during periods of volatility, making them easy to miss if you’re sitting in cash. And the cost is steep—just a handful of missed days can cut long-term returns dramatically. That’s the hidden downside of the so-called “sleep factor”: the comfort of avoiding short-term uncertainty can come at the expense of the long-term growth your plan depends on.
Staying out of the market—even briefly—can mean missing the best days and years of growth.
Conclusion
The evidence is clear: investing at all-time market highs is not a signal to retreat but an opportunity to stay committed to your long-term financial plan. History shows that new highs are a normal part of market growth, with forward returns often as robust as any other time. While the fear of a correction is understandable, the data suggests that the real risk lies in missing the market’s best days, which can significantly erode long-term wealth. By focusing on disciplined, evidence-based investing rather than reacting to headlines or short-term uncertainty, you position yourself to capture the compounding growth that drives financial success. Stay invested, stay patient, and let the market’s long-term upward trajectory work in your favor.
Sources/Additional Reading:
- Barclays Bank: “Fear of Heights: Investing at All-Time Highs”
- RBC Global Asset Management: “Investing at All-Time Highs”
- Dimensional Fund Advisors: “Why a Stock Peak Isn’t a Cliff”
- Y-Charts: “The Importance of Staying Invested”
Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by the Company), will be profitable or equal any historical performance level(s). No amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if the Company is engaged, or continues to be engaged, to provide investment advisory services.
TCI Wealth Advisors, Inc. is an SEC registered investment advisor. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by TCI), will be profitable or equal any historical performance level(s). No amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if TCI is engaged, or continues to be engaged, to provide investment advisory services.
