Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by Nate Kreinbrink, financial planner at NelsonCorp Wealth Management. Welcome back, Nate.
Nate Kreinbrink:
Thanks for being here.
Brandy Auterson-Hurst:
So the stock market has been trending toward new all-time highs in recent weeks. Is that something investors should be worried about or encouraged by?
Nate Kreinbrink:
Well, it’s a great question and quite honestly, one we get a lot. So while it’s common for the natural person to become uncomfortable when we set new highs, naturally thinking that we’re due for a pullback, what we found is that the historical data tells another story. And I think we’ve got a chart here that goes into this a bit more. So what we’re looking at here is the S&P 500’s average returns over the past one, three, five, and 10-year periods after hitting a new all-time high. And what we see is that returns have been just as strong or even better than during other time periods.
So for example, one year after that we hit an all-time high, the market gained an average of 13.5%, which is slightly better than the typical return in non-high return time periods. So that edge continues over longer timeframes as well, especially during the three and five-year marks, and only just slightly goes away at around the 10-year period. So that idea that you shouldn’t invest at all-time highs doesn’t necessarily hold up when you look at the data.
Brandy Auterson-Hurst:
Okay. So what should investors take away from this?
Nate Kreinbrink:
Well, there’s nothing scientific or magical about the markets doing well after we set new highs. It’s just what it’s tended to do historically. However, one important pattern to look at is that most of the market’s gains don’t necessarily come from picking bottoms, but rather from strong upward trends or momentum. So while past performance isn’t necessarily a guarantee, setting new highs is generally a good thing.
Brandy Auterson-Hurst:
If you missed any of our discussion, we’ll make it available for you on OurQuadCities.com.
Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.
Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.