Many investors hesitate to invest when equity markets are at, or near, All-Time Highs (ATHs). After record run-ups, investors inevitably feel the next move will be lower. This concern is understandable and affects investors of all shapes and sizes.
The anxiety around investing at new market highs is rooted in deep psychological forces. History has shown that humans are not always rational actors when it comes to money. Recency bias leads investors to believe that recent strong performance must soon reverse. This emotional response, while natural, most often leads to missed opportunities.
Analyzed data suggests that investing at/or near ATHs does not need to be feared any more than any other day #1 of investing.
Research shows that buying at or near all-time highs has not been a poor decision. In fact, ATHs are surprisingly common. For example, since 1950, the S&P 500 closed at a new high in roughly five percent of all trading days --1 out of every 20 days -- an occurrence more frequent than many expect. This means that investors who wait for a “better entry point” may find themselves buying at higher prices.
Looking at more recent data, 412 new all-time highs have been achieved since January 1st, 2013, through July 10th, 2025, and the S&P 500 has delivered a cumulative total return (dividends were reinvested) of 401.3% and an average return of 13.9% over the period of time.
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One-year returns following market peaks tend to be stronger than all other time periods, and three- and five-year returns are also better. Investing at a “new high”, while it may feel risky, has not historically led to underperformance over meaningful time horizons.
Timeframe |
Average Return after ATH (S&P 500) |
Average Return Anytime |
1 Year |
9.60% |
8.90% |
3 Years |
31.40% |
28.50% |
5 Years |
54.20% |
52.30% |
Source: Bloomberg, S&P Dow Jones Indices, calculations as of 2024
Investing at elevated levels does not mean ignoring valuations or fundamentals. Rather, it calls for a thoughtful and experienced approach. At WT Wealth Management our experts pay close attention to a vast number of economic benchmarks, company specific earnings growth, future interest rate directions, and geopolitical dynamics. Our proprietary Bull/Bear Sentiment Indicator allows the Investment Committee to measure and analyze 30 pieces of economic data. These indicators provide helpful context for whether current highs are supported by substance.
To learn more about the WT Wealth Management Bull/Bear Sentiment Indicator, please visit the link below.
https://www.wtwealthmanagement.com/whitepapers/2024-03/
Perhaps the most important lesson is that “time in the market” matters far more than “market timing”. Investors who attempt to wait for a dip often miss out on gains altogether. As we have shown many times in the past, simply missing just a handful of great days can dramatically reduce overall performance.
Investing at all-time highs may feel uncomfortable,
but it is not inherently unwise.
Markets often reach new highs as a natural byproduct of strong economic growth and investor optimism. Rather than trying to predict corrections or wait for better entry points, investors should focus on staying invested through all market cycles.
The key to long-term success is not avoiding investing near an ATHs but avoiding emotional decision-making. With the right mindset and help from the team at WT Wealth Management, investors can navigate All-Time Highs with confidence and clarity.
SOURCES
- Generated by ChatGPT