Although it has been less than 90 days since our last quarterly update, in many ways it feels like a lifetime ago. The last update was posted on April 9th of this year, just days after the so-called “Liberation Day” of President Trump’s announcements of broad global tariffs.
What has happened since?
So – what has this meant for markets?
Although we wish we could take credit, the day the last quarterly update dropped (April 9th) actually ended up being the third largest single-day gain for the S&P 500 (fingers crossed for a repeat?). As such, April 8th ended up being the quarterly trough for most indexes – including the S&P 500, Nasdaq, and international indices such as MSCI’s EAFE and Emerging Markets.
After the volatility in early April, the S&P 500 index was full steam ahead for its best quarterly performance since 2023, and the Nasdaq saw the biggest quarterly jump since 2020. International stocks (a point of emphasis in our comments last quarter) posted strong a strong quarterly return as well, with the EAFE (Europe, Australasia, and Far East) developed market and Emerging Market indices returning about 10%. Broadly, international stocks continue to lead the way through the first half of the year.
Why have markets responded so positively? For one, early fears by investors over the proposed tariffs have been largely mitigated as our current administration has revealed a willingness to negotiate to avoid prolonged substantial increases. Also, the economy is proving to remain resilient. For example, just last Thursday June’s payroll numbers were released showing a continued increase in U.S. job growth and a decrease in the unemployment rate. Many economists were projecting a slight uptick in the unemployment rate and softening jobs numbers.
All Time Highs – Cause for Concern?
There have been several headlines over the past week about how the S&P 500 has hit an all-time high after the jobs numbers were released. We commonly receive questions or trepidation from clients who are concerned about owning too much in stocks when they see such a milestone. The sentiment here is not unreasonable – investors should focus on buying low and selling high, right? Does it make sense to derisk or sell stocks when all time highs are hit?
It depends. We know.. everyone’s favorite answer. It’s worth facing some of the facts, though, before such significant decisions are made.
For one, all-time highs happen repeatedly. In fact, since the start of 2024, the S&P 500 index has hit an all-time high sixty-four times.
Even more enlightening is that investing on a day that is marked as a new “all time high” historically since 1988 has been predictive of higher-than-average future returns on time periods extending beyond three months. Simply put, stocks often hit new record highs and thereafter continue to grow and achieve even greater highs.
Investors who are tempted to wait on the sidelines for stock prices to decline often find themselves passive observers of a lost opportunity for wealth creation.
So, does that mean one should always assume record highs are a cause for celebration and throwing caution to the wind? In a word, no.
The amount of stock you own should be dependent on how much risk you can tolerate, and how much risk you need to achieve your goals. Both things should always be evaluated in light of your own unique circumstances and not based upon current market conditions or headlines.
If now is an appropriate time to consider reducing risk considering your time horizon to retirement, doing so at a point of market strength is always a good idea. However, betting against the market with the idea of timing the peak is a losing bet more times than not.
If you have any specific questions that relate to your investment strategy, please reach out to a member of our team.
Investment advice, financial planning, and retirement plan services are provided by Prosperity Planning, Inc., an SEC registered investment advisor. The information contained herein, including but not limited to research, market valuations, calculations, estimates and other material obtained from these sources are believed to be reliable. However, Prosperity Planning, Inc. does not warrant its accuracy or completeness. The information contained herein has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or to participate in any trading strategy. If an offer of securities is made, it will be under a definitive investment management agreement prepared on behalf of Prosperity which contains material information not contained herein and which supersedes this information in its entirety. Any investment involves significant risk, including a complete loss of capital and conflicts of interest. Past performance is no guarantee of future results. The applicable definitive investment management agreement and Form ADV Part 2A will contain a more thorough discussion of risk and conflict, which should be carefully reviewed before making any investment decision.