Yahoo Finance Stock market: History shows record highs aren't a bad time to buy
The S&P 500 (^GSPC) has been chugging to new highs on a daily basis over the past week.
And while investors may fret at buying the benchmark index at its highest level ever, a historical chart from eToro US investment analyst Callie Cox shows there's actually no better time to get into the market.
The chart shows that money invested at all-time highs on average performs better over the next year than money invested on any given day.
"History has shown us time and time again that record highs usually lead to more record highs," Cox told Yahoo Finance.
Read more: How to start investing: A step-by-step guide
Cox pointed out that the market action over the past week — where the S&P 500 hit a new record high and then continued to reach new highs in subsequent days — is pretty standard. About 80% of the S&P's records since 1950 have led to at least one more all-time high the following week, per Cox's analysis.
"A lot of people think the market goes up and down, and so you know, if it's an all-time high, well, it's going to go down," Creative Planning CEO Peter Mallouk explained to Yahoo Finance. "And that's not really how the market works. The market generally goes up. It just has periods where it's down."
Mallouk said investor sentiment can often shift to a simple theory that what goes up must come down. This, however, is against the general trend of the broad stock indexes, which in the long run have chugged higher. And while it might not feel like it since markets just took almost two years to hit new highs, markets generally hit a new all-time high every 19 days, per Mallouk.
"The key is to deploy your capital," Mallouk said. "If you are sitting on the sidelines, you're far more likely to be worse off than someone who is invested and happens to catch a doubt market right after they invest."
And to many, the current market environment still has a case to build higher before the market falls off. The S&P 500 officially entered a bull market in June. But the first record high of the bull market just came in January. History shows that since 1950, bull markets have lasted four-and-a-half years on average from when stocks hit the first new high. Not to mention, long breaks between record highs like the market just experienced typically produce outsized returns.
But the case for stocks goes beyond historical figures too. Cox highlighted the current economic backdrop as a bullish setup for equities as well. The US economy just closed 2023 with another surprise to the upside in economic growth. Consumers are still spending, and while showing some signs of cooling, the labor market remains tight.
"We see a market that's anticipating rate cuts with the added context of a strong economy," Cox said. "That's a really good setup for stocks."
Josh Schafer is a reporter for Yahoo Finance.
Click here for in-depth analysis of the latest stock market news and events moving stock prices.
Read the latest financial and business news from Yahoo Finance
