Do Stocks Stumble After All-Time Highs? | The Informed Investor 6

Episode 6: When the stock market soars to new highs, does that offer a useful signal for where the market is headed? Should you make a move—or stay in your seat?

These questions confound many investors, especially those who may worry that the market is due for a big fall.

But investors may be surprised to find out that average returns over one, three, and five years after a new market high are similar to those after months that ended at any level.

Reaching a new market high doesn't automatically mean the market will then retreat.

Research indicates that stocks are priced to deliver a positive expected return every day. Which means that reaching record highs with some regularity should not be unexpected. And that's exactly what the data suggests.

Since 1926, the US stock market has ended the week on a new high slightly more than one out of every six weeks. Fluctuations happen, particularly in the short run. Bear markets can be painful. But the evidence shows that stocks have tended to rise in the long run—which has led to new highs.

In Episode 6 of "The Informed Investor," Dimensional's Mark Gochnour, Head of Global Client Services, and Jake DeKinder, Head of Client Communications, explore some misconceptions about all-time highs in the stock market and address the importance of having an investment plan that can help prepare you for highs, lows, and everything in between.

Learn more at https://www.dimensional.com/