Market Hits Record High...Now What?

Hi Reader,

After two years, the U.S. stock market just hit another all-time high.

But this "breaking news headline" is actually more common than most realize.

According to Bloomberg, the S&P 500 has hit an all-time high over 1,200 times since 1915.

In today's email:

What do all-time highs mean?
Will the market continue to climb?
How should investors respond?

But first, listen to this week's podcast episode. 👇

Stop Talking About “Paying Off the National Debt”

Today, I'm joined by monetary economic expert, Cullen Roche. He shares why paying down $34 trillion of debt isn't realistic (or smart).

Listen Now →

All-Time High Anxiety

With the market hitting another all-time high, many are wondering...what's next?

It's common for investors to feel like all-time highs signal the market is peaking and a crash MUST be around the corner.

However, historically, all-time highs are typically followed by more all-time highs.

Need more optimism?

Since 1926, the S&P 500 was higher 1-year after hitting a new record 81% of the time.

After 5-years, the market was higher 86% of the time.

While this data may help calm our nerves, all-time highs will always take the blame for inevitable downturns. As Ben Carlson put it:

Eventually, a bear market will be traced back to a peak that came at a high. The problem is that we’ll only know about that peak in hindsight. Most of the time, highs lead to more highs. But when the party stops, be aware that the other side of those highs could mean a severe bear market.

Because we don't have a crystal ball and we don't know when the "party will stop," we have to build a plan (and a portfolio) around things we can control.

One of those things is patience.

Creating the Conditions for Patience

One of the primary goals of financial planning is to establish an environment where making sound financial decisions is easier than it would have been otherwise.

In other words -- at least with regard to investing -- this means we should create conditions that make patience an easier choice.

I believe the best way to foster patience is to set aside the assets you know you're likely to spend in the near term (2-5 years) to avoid the potential adverse effects of ill-timed volatility.

That would include your income and lump sum needs, all of which are unique to you.

Doing this will hopefully make you less likely to sell your long-term assets at inopportune times.

A simple way of thinking about this is to hold:

short-term assets for your near-term goals; and
long-term assets for long-term goals.

If implemented properly, our expectations for how our investments behave (and perform!) through various market environments should hopefully better align with reality.

And aligning our investment expectations with reality should help drive better decisions.

While this approach might leave potential returns on the table, I think the tradeoff is worth it if it helps us make better decisions through the "never-ending parade of nonsense."