If you're asking whether you should invest when the stock market is at an all-time high, the short answer is: yes, you probably should. Decades of data across 10 developed markets from 1970 through May 2026 show that average stock returns following all-time highs are positive at every major time horizon — and in the short term, they're often higher than returns in other months. The fear of buying at the top is understandable, but the data doesn't support it as a reason to stay out of the market.
Let's break down exactly why all-time highs are nothing to fear — and the one nuance that actually is worth paying attention to.
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Ben Felix explains why all-time highs are statistically expected events, not warning signals
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Is It Safe to Invest at All-Time Stock Market Highs?
Yes. The intuitive fear that "what goes up must come down" is not backed by stock market data. When the S&P 500 or the S&P/TSX Composite hits a new all-time high, that doesn't make a crash more likely. In fact, using total return indices — which include reinvested dividends, not just price movements — roughly 30% of all months in the US market from 1970 to 2026 were all-time highs. The world index hit all-time highs in 31% of months over the same period.
If you waited every time the market looked "too high," you would have sat on the sidelines for nearly a third of all available investing months. That's an enormous amount of compounding growth left on the table.
The evidence is clear: staying invested through all-time highs is, on average, the better strategy. The alternative — trying to time the market — requires you to be right twice: once when getting out, and again when getting back in. That's much harder than it sounds, and more likely to result in losses than gains.
What Is the Gambler's Fallacy and Why Does It Hurt Investors?
The discomfort many investors feel at market peaks is rooted in a well-documented cognitive bias called the gambler's fallacy — the belief that a string of good outcomes makes a bad outcome more likely. Think of someone at a roulette table who assumes that after five reds in a row, black is "due." The wheel doesn't have memory. Neither does the stock market.
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Chart showing the percentage of months that were all-time highs across 10 developed markets from 1970–2026
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Stock returns are close to random from day to day. A series of positive returns pushing the market to an all-time high doesn't increase the probability of a crash tomorrow. Recognizing this bias is the first step to making more rational investment decisions — and resisting the urge to move to cash every time headlines celebrate a new market record.
How Often Does the Stock Market Hit All-Time Highs?
More often than most people think. Looking at 10 developed stock markets from 1970 through May 2026 using total return indices and monthly data:
- United States: 30% of months were all-time highs
- Canada: 23% of months were all-time highs
- World Index: 31% of months were all-time highs
- Italy (lowest): just 9% of months were all-time highs
- Average across 10 countries: 20% of months were all-time highs
All-time highs also tend to cluster together. There's a well-documented momentum effect in stock markets — when things have been going well recently, they often continue to do well for a while longer. The flip side is also true: periods of high volatility and low returns tend to cluster together, meaning there can be long stretches with no new all-time highs at all.
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Comparison of average stock returns following all-time highs vs. all other months at 1, 3, 5, and 10-year horizons
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The world index hitting all-time highs more frequently than individual country indices is partly a diversification effect — when one country's market is down, others may be up, smoothing out the overall ride.
What Do Stock Returns Look Like After an All-Time High?
This is where the data gets really interesting. Looking at average returns following all-time highs compared to returns in all other months:
- Short term (1 year): Returns following all-time highs are consistently higher than returns in other months — likely driven by the momentum effect.
- Medium term (3–5 years): Returns following all-time highs in the US are still higher than average. Canada is more mixed.
- Long term (10 years): Returns following all-time highs are slightly lower than other periods — likely because valuations tend to be elevated when the market is at its peak.
Critically, expected and average realized returns remain positive following all-time highs at every horizon examined. This is not a story about avoiding the market at peaks. It's a story about modest differences in long-term expected returns — differences that would be nearly impossible to exploit with a market-timing strategy.
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CAPE ratio data showing the relationship between starting valuations and 10-year forward returns across 10 developed markets
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Does the CAPE Ratio Actually Predict Future Stock Returns?
This is the more serious concern lurking behind the all-time high conversation. The Cyclically Adjusted Price-to-Earnings (CAPE) ratio, developed by economist Robert Shiller, measures how expensive a stock market is relative to the average earnings of its companies over the past 10 years. When the CAPE is high, you're paying more for each dollar of earnings — and your expected future return is lower.
At the time this analysis was recorded, the US stock market's CAPE ratio was near the level that preceded the dot-com bust — one of the highest readings in history.
Analyzing 10 developed markets from 1982 through 2024 confirms: higher starting valuations do lead to lower average 10-year returns. The relationship is real. But there are two important caveats:
- It's noisy. Even when valuations are high, some periods still deliver strong returns. The distribution of outcomes is wide enough that timing the market based on CAPE alone is extremely difficult in practice.
- The US is not the whole world. When you include other developed markets in the analysis, periods of high CAPE ratios don't paint as universally grim a picture as US-only data suggests. International diversification matters here.
The honest takeaway: valuations are worth monitoring, but they're not a reliable signal for making tactical in-or-out decisions with your portfolio.
Price-Only vs. Total Return Index: Why the Difference Matters
Here's something that rarely gets discussed in mainstream financial media: the all-time high figures you see reported are almost always based on price-only indices — they track stock prices but exclude dividends. Total return indices, which reinvest dividends back into the index, paint a more accurate picture of what investors actually earn.
Why does this matter? When a company pays a dividend, its stock price drops by roughly the dividend amount. A price-only index records this as a loss. A total return index correctly treats it as neutral — you received the cash. This quirk means:
- Price-only indices show fewer all-time highs than total return indices
- Media coverage tends to be more negative when dividends are higher — even though investors are being paid
- The all-time highs you see in the news are understating how often investors are actually at peak wealth
Academic research confirms this distortion affects how the public perceives market performance. It's a good reminder to be skeptical of how stock market data is presented.
Why Is Market Timing So Difficult to Get Right?
Even if you're convinced that valuations are stretched and a correction is coming, acting on that belief profitably is another matter entirely. To successfully time the market, you need to be right twice: you have to sell near the top and buy back near the bottom. Miss either call, and you're likely worse off than if you'd simply stayed invested.
History is littered with investors who sold at all-time highs, watched the market climb further, and either bought back in at a higher price or missed the recovery entirely. The costs of being wrong — missed dividends, transaction costs, taxes on realized gains, and the psychological difficulty of re-entering after a painful exit — stack up quickly.
The most reliable strategy supported by the data is straightforward: stay in your seat and stick to your plan. All-time highs are not a warning sign. They are, in a healthy economy with growing companies, exactly what you should expect over time.
