The idea that “what goes up must come down” might feel right in the short term, but it’s simply untrue from a long-term, multi-year perspective.
Here are the facts: Since 1950, the US market has made more than 1,300 all-time highs.
That’s an average of 17 new record highs per year.
Ultimately, these fresh peaks reflect the cash-generative capabilities of the underlying businesses in the long run.
And it’s expected to keep getting better as AI and robotics continue to drive efficiency higher.
Why All-Time Highs Feel Uncomfortable
As the market reaches new highs, fear of missing out (FOMO) is real for many investors.
Yet, these same investors may recall buying at an all-time high last year, only for President Trump’s Liberation Day to trigger a sharp market sell-off.
For those with no cash on hand to average down during that crash, it certainly felt like a punishment for being greedy.
Psychologists call this “regret avoidance”: the tendency to shy away from decisions that might repeat a painful outcome.
The first step?
Recognising this bias for what it is.
What History Shows About All-Time Highs
Based on research by Fidelity, the average total return of the S&P 500 index after hitting an all-time high is 12.7% over the following 12 months.
That’s a double-digit return – not bad for being “greedy” and chasing market highs.
But what if the market undergoes a correction — a decline of 10% or more? How often does that happen after a market high?
According to RBC Global Asset Management, after the S&P 500 hits an all-time high, the probability of a correction is just 9% in the first year, dropping to only 2% by the third year.
By the fifth year, the index has never been down more than 10%.
The verdict is clear: the longer you hold, the less likely you are to lose money — and the better your odds of capturing gains.
Why Markets Reach New Highs in the First Place
According to RBC Wealth Management, in 2025, the S&P 500 delivered 17.9% in total returns, driven by major tech companies such as NVIDIA (NASDAQ: NVDA) and Alphabet (NASDAQ: GOOGL).
This optimism persists in 2026.
Research firm FactSet has found that more than six out of 10 companies in the S&P 500 reported 2026 first-quarter (1Q 2026) earnings per share (EPS) that exceeded estimates.
While earnings growth could be due to many factors, in my opinion, there are two structural drivers that stand out: AI investments and a supportive US economy.
On AI investments, Goldman Sachs estimates that the largest cloud companies are pouring more than 90% of their expected cash flows this year into AI infrastructure buildout, amounting to US$670 billion.
On the US economy, the US Bureau of Economic Analysis reported GDP growth of 2% in 1Q 2026, backed by investments, exports, consumer spending, and government spending.
Common Mistakes Investors Make at Market Highs
“Time in the market is better than timing the market” is not just a cliché – it’s backed by the numbers.
According to Fidelity, if you invested US$10,000 in the S&P 500 index from the end of 1987 to the end of 2025, your initial capital would have grown to US$616,013.
However, missing just the five best days since 1987 would have slashed your returns to US$380,479, or 38% less, while missing the best 50 days would have decimated the returns to just US$44,626.
Timing the market might feel rewarding at first, but it’s costly in the long run.
How about holding on to cash?
Contrary to the popular belief that holding cash offers stability in a volatile market, the long-term effect of inflation will certainly erode the purchasing power, even if the face value stays the same.
Fundamentals matter as well.
The S&P 500 forward price-to-earnings (PE) ratio appears elevated at 21, above the median of 18.5.
However, the price-to-earnings-growth (PEG) ratio is hovering around 1.0, suggesting that its high growth is still strong enough to justify the higher PE.
Ergo, despite the index’s high PE ratio, the current growth is supporting the higher-than-median multiple.
It’s a Feature, Not A Flaw
The market hitting a new high is a feature, not a flaw.
And markets aren’t casinos, although short-term traders often treat them as such.
Long-term investors know better and see the underlying innovations driving global efficiencies and productivity.
Focus on owning businesses with durable cash flows, profitability, and credible plans to leverage AI instead of being disrupted by it.
Another crucial and proven feature of the market is the long-term exponential returns of compounding just by staying invested – something investors often realise only after they’ve missed the best days in the market.
Get Smart: Embrace the Feature
100 years of historical market price action show that the all-time highs were never danger signals in the past.
And that’s not likely to be the case even for now, especially with a fairly valued PEG, made possible by a comparably high growth rate.
The structural tailwinds, primarily the AI-led innovations and a resilient US economy, remain intact.
Long-term investors need to stay rational – ignore the headline noise on market highs, stay invested in quality businesses, and prioritise time in the market over timing the market.
It’s not just your imagination – filling up the tank is hitting the wallet harder than it has in years. With oil prices whipsawing and the NASDAQ behaving like a roller coaster, “paralysis by analysis” is a real risk for investors right now. Secure your seat at our upcoming free webinar to see how we manage cash and pick winners while the headlines are screaming “Correction.”
What if the current “market turmoil” isn’t a crisis… but a setup?
History shows most pullbacks don’t become crashes. The real edge is knowing how to act early. Our FREE report reveals the framework smart investors use. Download it now.
Follow us on Facebook, Instagram and Telegram for the latest investing news and analyses!
Disclaimer: Larry L owns shares of NVIDIA and Alphabet.
