By: Matt Garrott

The S&P 500 continued its march higher, up 4.3% in the second quarter with 3.6% of that in June.  The index has gained 15% in the first half of the year and continues to set new all-time highs.  If the objective of investing is to buy low and sell high, is now the time to sell U.S. Large Cap stocks?  Can we really expect the S&P 500 to go up in a world where Joey Chestnut is barred from the 4th of July hotdog eating contest?

Our answer is that investors should stick to their financial plan, rebalancing diligently.  Even at all-time highs?  Even at all-time highs.

While the annualized returns of the S&P 500 revert to the mean over the long-run, the value of the index does not.  It grows over time.  The result is over 1,100 new all-time highs since 1957.  New highs are a regular market feature.  They are not novel or a trigger for the market to turn.

In fact, market timing around highs is a terrible idea.  Harris Associates, a money manager that runs the Oakmark funds, analyzed how four hypothetical investment strategies would do under different timing scenarios.  Each strategy is assumed to invest $10,000 in the S&P 500 in 1973 and followed the strategy through March of 2024.  The first strategy sold the S&P 500 upon reaching an all-time high, then didn’t buy back in until after a decline of 20%.  The second and third strategies did the same thing but bought back in after 10% and 5% declines.  The fourth strategy just bought and held the S&P 500 through the entire period.  Sounds like selling high and buying low, right?

  • The 20% strategy would have turned $10,000 in 1973 into $98,741 in 2024.
  • The 10% strategy would have ended with $115,859.
  • The 5% strategy would have ended with $167,931.
  • The buy and hold strategy would have ended with $2,225,224.

Waiting for a drawdown often meant buying back in at an even higher price point than when the investor sold at the initial “top”.  Too often, the current market “top” is just another step on the way up when looking at market returns over the long-term.

On a separate note, we continue to recommend doing your best (within reason) to secure your online identity.  We continue to see examples of hackers attempting to commit fraud.  Use secure passwords, change them regularly, use 2 factor authentication and expect us to contact you for money movements and confirming wires.  This may seem like overkill, but we take your security seriously, especially in the face of increasingly sophisticated fraud attempts.