The S&P 500 last reached a new all-time high on January 3, 2022.
The market is slowly but surely trying to come back to new highs but we have been in the water for almost two years:
The market is close to new highs but stocks have gone nowhere in almost two years.
We’re a little less than four years into 2020 and half of those years haven’t seen any new highs, but this decade has already had plenty of them.
Here are the new all-time high numbers for the 1950s by decade1:
The stock market is irregular so some decades we get a lot of new highs while some decades we get very low highs.
By my calculations, we’ve now gone 473 trading days without a new high for the S&P 500.
This is actually the fifth longest series since 1950:
The strangest thing about those other streaks is how close they were in proximity.
In each example, you had a recession, followed by a brief bull market decline and then an even bigger decline in a short period of time.
In both the periods the stock market more or less witnessed a decline for 13 years.
The recession of the late 1968–1970 market is one of the most forgotten crashes in history, followed just a few years later by the recession of 1973–1974.2
And we all know about the lost decade that started this century, in which the stock market was cut in half twice.
The S&P 500 was up 6.8% per year from 1968-1980, but the 7% inflation rate during that time completely wiped out that return.
The market was up 23% overall from 2000-2013, for an annual return of 1.6% per year.
Despite the fact that you had two extended periods where investors saw some new all-time highs, if we look at returns from 1968-2013, the stock market was still up about 10% per year.3
This is one reason the stock market can be so frustrating. Returns are lumpy. They can be frightening for a long time. You can stay underwater for years at a time.
It’s possible we could see new all-time highs on the S&P 500 by the end of this year or early next year. And then we could experience another bear market, in which stocks go nowhere for a long time. Or we could see the birth of a new bull market.
The truth is that no one knows what will happen next with stock prices.
This is one reason why stocks offer a risk premium compared to other asset classes.
There’s always the possibility of a lost decade or a booming market.
The important thing for investors is that your financial planning should be based on the expectation that both of these scenarios are likely over your investment lifecycle.
You just don’t know when.
All-time highs, risks and consequences
1I started here in the 1950s because there were no new all-time highs in the 1930s or 1940s. It took until the early 1950s for a detour from the 1929 highs following the Great Depression.
21The bear market of 1973-1974 needs to hire a publicist. I don’t know how this almost 50% crash (worse after inflation) didn’t get a nickname. Great inflation is ok but I’m open to suggestions.
3Real returns after inflation were closer to 6% per year.