It could be a great time to buy stocks. Here’s why.
Investors celebrated last Friday as the S&P 500 notched its first record-high close in over two years—and then cheered again as the index kept its winning streak going into this week.
All of this has come on the heels of the S&P 500’s 29.2% return last year (versus an interest rate on cash-equivalent assets of around 5.5% or less throughout 2023).
These new highs have also left some investors wondering what to do next. Those who underweighted stocks in recent months may worry that they’ve missed the rally and should continue to shun equities, while stock market bulls may view the run-up as an opportunity to take profits off the table.
But both of those moves—avoiding or selling stocks—could potentially prove costly. The reason: Over the past 35 years, buying stocks when the market hits a new high has worked out better on average for investors than buying on any day (see chart below).
The future can’t be predicted with certainty, of course. But if Shakespeare was right and “what’s past is prologue,” stocks may be ready to accelerate further—especially when you consider that investors currently hold around $6 trillion in cash. Even a moderate percentage of that money going to stocks could help push the market higher.
The upshot: New highs don’t necessarily indicate that stocks have peaked and are due for a fall— an idea that investors with money “sitting on the sidelines” might want to remember this week.
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