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What Goes Up, Might Not Come Down Thumbnail

What Goes Up, Might Not Come Down

US stock market indices hit all-time highs in recent weeks, leading some investors to wonder whether now is a good time to be in stocks—or do record levels portend an upcoming tumble? The historical data should help allay such concerns. 

New highs for stocks are not exactly uncommon. Since 1926, the US market has ended the week on a new high in 933 out of 5,099 weeks, slightly more than one out of every six. Periodic record setting should be expected for an asset class with high historical average returns! Interestingly, the average return for weeks following these new highs was 0.26%—very close to the average return of 0.22% across all weeks.  

Many of us can be guilty of waiting for the other shoe to drop whenever something has gone well. Fortunately, we don’t have to view markets that way. As long as investors demand positive returns in exchange for holding stocks, a new market high doesn’t mean the market is going to snap back. It may mean things are about to jump forward.

Stay committed to your long-term, goal oriented financial and investment plan.  Your future self will thank you.