Sensible Perspectives

Stock Market at Record Highs – What Now?

Posted by on April 3, 2013

Stock Market at Record Highs – What Now?

Market Table

The stock market has been rising fairly steadily for some time. Depending on the newspaper you read, or the analyst you follow, this “bull market” has been going since March of 2009, or September of 2011. As the “nominal” columns in the table at right indicate, the market is reporting higher index values than ever before. Stock market news programs have been talking about new all-time highs (emphasis theirs).

Some market observers have suggested that now is a good time to take gains, or even to sell all stocks. The say that the stock market can’t go higher, won’t go higher, is unlikely to go higher, etc.

(By the way, this at the same time that others recommend selling bonds to buy stocks! Why can’t all market observers ever agree on what we investors should do?)

What does an “all time high” mean?

Your Best Defense

In short, the stock market is unpredictable. There is little indication that it is more or less unpredictable today than at other times.

Your best defense depends on you, and not on managing your stock market holdings:

  1. Have a solid financial plan, one that does not depend on what the stock market does.
  2. Take no more stock market risk than you can afford.
  3. Once you’ve selected your level of stock market exposure, don’t try to outguess the market. There is a lot of evidence that people tend to manage their investments with their emotions. That tends to produce buying high and selling low, on average and over long periods of time.

If you have concerns about any of items 1, 2 or 3, please get in touch with me or your advisor.