How Often Should Investors Expect All-Time Highs?

by | Dec 7, 2022 | Blog, Videos

In this week’s video, Casey discusses how difficult it’s been for investors to manage their expectations after 2021 and 2022.

He shares statistics about how long it’s been since the market has made a new all-time high and how that relates to previous years.

It’s important for investors to manage their expectations and not always compare their portfolio’s performance to its all-time high.

Show Notes

Liz Ann Sonders – Charles Schwab

All-Time Highs Are Both Scary and Normal – A Wealth of Common Sense

2021 Was One of the Best Years in Stock Market History – A Wealth of Common Sense

Is Investing More or Less Risky After Stocks Go Down? – Mullooly Asset Show

How Often Should Investors Expect All-Time Highs? – Full Transcript

**Click here for a full downloadable PDF version of this transcript**

Casey Mullooly: When can we expect the market to be back at all-time highs? Keep watching episode 319 to find out.

Welcome back to the Mullooly Asset Show. I’m your host, Casey Mullooly, back with you for episode 319. Sorry for that teaser here. I’m not going to give you my prediction about when the market is going to hit another all-time high. But I am going to share some helpful information about managing and setting appropriate investing expectations.

So, Liz Ann Sonders, who’s the Chief Investment Strategist at Charles Schwab, recently shared that it has been 230 days since the S&P 500 has made a new all-time high. Seems like a long time. When was the last time we have gone this long without making a new all-time high in the market? I’ll wait. I’ll wait. Give me your best guesses. No, it is not the great financial crisis of 2008-2009. It is 2016, when the S&P 500 went roughly 300 days without making a new all-time high.

But 2016 was a pretty unremarkable time in the market, or at least in hindsight it was, probably didn’t feel like it living through it. But 2015-2016 was a time that we look back on, and we can see clearly that we were just trading and going sideways and just chopping back and forth in the market, which has been what we’ve done for the last couple months here in 2022.

So, some more numbers for you. Ben Carlson, who blogs at A Wealth of Common Sense, we’ll link it up in the show notes, has wrote about how the market is not at all-time highs 95% of the time. So, said another way, the market is making a new all-time high on 5% of trading days. So, you’ll spend most of your time as an investor, almost all of your time as an investor, not at the high watermark of your portfolio, but that’s what we all anchor to and measure to.

So, Ben also wrote about how there were 70 days in 2021, 70 just in 2021, where the market hit a new all-time high, which is clearly a historical outlier. And this year, we’ve seen the opposite of that. So, we’ve just seen it balance itself out.

My point being by sharing all of this is that if you measure your portfolio’s performance compared to its all-time high, the highest that it’s ever been, you’ll almost always be in a state of disappointment. It’s not realistic to expect that your portfolio is going to hit a new all-time high consecutively without giving some back here and there.

We have to try and set appropriate expectations for investing because expectations drive beliefs about how investing should go or about what the market should do, not what the market is actually doing. And those beliefs can sometimes mistakenly drive us into acting and trying to control it when, in large part, what the market does is largely out of our control.

So, here’s one more from Ben dating back to World War II. The market has spent roughly 54% of its time 10% or more off its all-time highs. So, just to rephrase that, about half of the time, the market is in a state of drawdown of 10% or more, which is exactly where we’ve been for the majority of this year.

So, we hate going through years like we have in 2022, just as much as you probably have. We much prefer to be at the high watermarks of our portfolios, and for the market it’s much more fun.

But we know that years like this are par for the course and should really be expected going forward. 50% of the time down 10% or more should be expected going forward. And hopefully those expectations can stop you from making investing mistakes. So, that is going to do it for episode 319. Thanks, as always, for tuning in. We’ll be back with you for 320.

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