David Kennon, Kennon Financial
Is It Okay That the Stock Market is at an All-time High?
In the past couple of weeks, I’ve started hearing some of the same dangerous language from many of you. The following information could make or break your financial future.
Do you find yourself ever saying the following statement to yourself?
“The stock market is DUE to crash. The market can’t go up forever. It’s at an all-time high. It has GOT to crash at some point here.”
So, is it going to crash soon? I’m not sure; my crystal ball is in the shop.
By the way, none of this hand-wringing and worrying is your fault. You are inundated with only half of the story when it comes to investing. You can’t go a day without someone on TV or the radio or the internet saying something confusing, contradictory, or just downright scary.
We need to change how your brain thinks about this stuff. Here is the new thought that is going to cycle through your mind anytime you hear something about record-breaking stock performance: “Just because the stock market is at an all-time high does not increase the chance of it crashing.”
It all started back at the end of 2013. The Dow Jones had completely regained its point losses from 2008. I started to have clients say to me, “The market is at an all-time high. It is DUE for a crash.”
In 2014, the S & P 500 had over a 13% return. Oops. I guess the market wasn’t due to crash.
But it didn’t stop people from saying to me in 2015, “Dave, NOW the market is REALLY due for a crash.”
In 2015, the S & P 500 returned a little over 1%.
“See, Dave. The market is faltering. It simply can’t keep going up like this.”
In 2016, the S & P 500 returned 12%.
So far, year-to-date in 2017, the stock market has returned 16%.
So, here comes the refrain again, “Dave, you would be crazy to invest in the stock market when it’s at an all-time high.”
Back in 2014, if you had invested $100,000 in the stock market, you would have close to $150,000 now. If you wait until the stock market has a “correction,” you might be waiting for a long time, watching everyone else grow their money.
Morals of the story:
- There have been long stretches of history where we had no prolonged, deep market recessions (1942-1972 is one example. 1975-1999 is another.).
- Without the power of stocks in your portfolio, it is going to be very difficult for your money to grow enough to keep pace with your lifestyle.
- It is completely and totally impossible to time the stock market.
- In the past 42 years, the stock market has gone up 33 times and down 9 times.
- During the 9 years, it went down, it went down an average of -13% per year.
- During the 33 years it went up, it went up an average of 15% per year.
David Kennon, Kennon Financial
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