Ben Carlson on the false narrative of all-time highs resulting in a crash. There’s a lot of talk about the market being ready for a correction simply because things are going well.
Here, Carlson quotes a myth from his own book, publishedin 2013:
Of course, stocks can fall from all-time highs, but hitting an all-time high isn’t necessarily the trigger that causes them to fall. Since 1950, there have been over 1,100 all-time highs reached on the S&P 500. That’s good enough for almost 7 percent of all trading days or roughly one out of every 15 days that the market is open. Here is the breakdown by decade that shows how often the S&P 500 hits a new high level:
He then goes on to give some numbers on what’s happened since then:
Since new highs were hit in 2013 there have been 201 new ATHs in total. This year alone there have already been 13 new all-time highs on the S&P 500, the same number that was seen in the entire decade of the 2000s. It’s not even the end of January.
Stocks are already up almost 8% this year and that’s after 9 straight years of gains (with 7 of those annual returns in double-digit territory). It’s been almost 20 months since we saw a 5% correction.
A good reminder that being cautious can be costly too. Rad his post All-Time Highs, Risk & Consequences at A Welath of Common Sense.