Following a very strong year in 2023, the S&P 500 index is off to a good start in 2024 with a +10% return so far this year.
In the first quarter of 2024, the S&P 500 index finally surpassed the prior high point which was reached over two years ago at the beginning of January 2022.
As a result, any day that the market closes at a price above the previous high this year, a “new all-time high” is reached.
Is this cause for concern?
Here are some stats regarding “new all-time highs” for the S&P 500 Index from the image below:
Since 1950, the S&P 500 has reached “new all-time highs” about 1,250 times (defined by the closing price at the end of the day).
This is an average of about 17 “new all-time highs” per year since 1950.
This equates to a "new all-time high” about once every 14 days on average since 1950.
So is hitting "new all-time highs" cause for concern? Usually not.
The stats and image above show that “new all-time highs” have historically been more the norm than the exception.
The image below, which shows the US Total Stock Market from 1926-2023, further illustrates that the long-term trend is positive and "new all-time highs" are commonplace.
By having a well-organized plan and sticking with the plan through inevitable down periods that occur, like in 2022 when the S&P 500 was down 20%+, you benefit nicely during typical periods where markets march higher (the S&P 500 has been positive about 73% of years since the 1920s).
The Investment Planning Process For Retirement:
The goal of the investment planning process is to provide you with income in retirement that lasts for life.
To accomplish this, a plan designed to protect you from four risks is needed: stock market, inflation, liquidity, and longevity.
1 – The plan includes a “short-term bucket”: This primarily includes bank accounts. This bucket provides liquidity and protection from stock market fluctuations.
2 – The plan includes a “middle bucket”: This includes instruments such as money market funds, CDs, or bonds depending on your plan. This bucket is designed to provide some protection from stock market fluctuations, and also a slightly higher long-term expected returns than the short-term bucket.
3 – The plan includes a “long-term bucket”: This includes diversified stock funds that primarily invest in large US companies. This bucket will fluctuate in value and will experience down days, months, quarters, and years from time to time. However, quality tends to be resilient and eventually recover. The purpose of this bucket is to provide the growth potential needed to fund a long retirement and address inflation, healthcare costs, and other items that may come up down the road.
By keeping an appropriate amount in the short-term bucket and middle bucket (the “appropriate amount” is determined primarily by your unique retirement cash flow needs), you can position yourself to minimize the risk of needing to sell investments in your long-term bucket to fund retirement expenses at bad times.
Maintaining a healthy balance between all three buckets helps protect you against the four retirement risks: stock market, inflation, liquidity, and longevity.
Want To Discuss This Individually?
1 - For clients: Call or email me any time as always.
2 - For non-clients: Complete the form on the website to request a retirement planning consultation: www.rolekretirement.com
This is article is for informational purposes only and should not be considered as tax or legal advice.
Advice is only provided after entering into an Advisory Agreement with the Advisor.
See other disclosure here: Disclosures