Editor's note: You need to know when to sell... The S&P 500 Index has hit more than 30 new all-time highs in 2024. Rising stock prices typically makes investors worried about buying at the peak. But according to Jeff Havenstein – analyst for Retirement Millionaire – this bull market still has plenty of room to run higher... But to successfully keep investing throughout this uptrend, you must be aware of the catalysts driving this run-up. In today's Masters Series, adapted from the May 15 and June 3 issues of the free Chaikin PowerFeed daily e-letter, Jeff explains why many investors flee the stock market once it hits a new high... details how history shows new highs signal you must remain aggressive... and reveals how you can capitalize on this bullish setup...
Why You Shouldn't Panic if the Market Hits Another New High By Jeff Havenstein, analyst, Retirement Millionaire With the S&P 500 Index recently hitting all-time highs, you're likely one of two investors... You see a run-up in stocks and get nervous. You think to yourself that nothing goes up forever... and you see the risks in the economy and market. So you decide to flee to safer assets like government bonds and cash. Or you're the investor who sees new highs and decides to buy stocks... You want to add fuel to the fire. All your friends are talking about stocks, so you don't want to be left behind if there is another major move higher. In my early days in the market, I struggled with which investor to be. I'll never fault anyone for taking some profits at a market high (though, to be clear, you should never sell all your stocks, as my colleague Dr. David "Doc" Eifrig has often written about). But today, I'm here to tell you that you should be the second type of investor. The numbers back it up... The chart below looks at returns for the S&P 500 from January 1988 to August 2020. Since 1988, if you bought the S&P 500 on any given day, you would have seen an average one-year return of 11.7%. That's fantastic. There's no doubt that stocks are the best game in town. But if you bought when the market hit an all-time high, you would have done even better... Specifically, your average one-year return would be 14.6%. On average, buying at all-time highs also outperforms over a three- and five-year holding period. One of the most valuable things I have learned watching markets is: The most likely thing to follow a new high is another new high. Folks see stocks hitting records on the news. If they're not already fully invested, their emotions start to take over... and that motivates them to follow the herd. They buy stocks to catch up and this pushes markets even higher. Of course, it's true that nothing goes up in a straight line forever. The key to being a savvy investor is to spot when things get a bit too frothy in the market. I don't believe we're there yet. Consumer sentiment has bounced higher from its 2022 lows. But it's still below historical averages. I'm just not seeing people getting too excited about stocks. No one seems to be "all in" just yet. And these aren't the only trends signaling high upside ahead right now. We must also consider what history tells us regarding stocks in presidential-election years... Stocks have rallied from June through December during 16 of the past 18 presidential-election years. And they've produced an average gain of 10% in those years. A recent study from Bank of America zeroed in on this idea even further... According to the financial-services giant's data, June through August is the strongest period during these years. Since 1928, the stock market has been up over this three-month stretch 75% of the time – with an average gain of 7.3%. The election-year blueprint is happening once again. In short, the data meshes well with the average price cycle in a presidential-election year. Take a look... Sure, this year's pivot happened a little later than the historical average of late March. But the pattern is similar. And importantly, that sets us up for a big rally in the months ahead. We're now getting past the historical "rough patch" at the start of a presidential-election year. And we're entering the period when stocks begin to soar. That's great news. We're seeing the market's coming rebound in another way, too. Take a look... That's a six-month chart of the Chicago Board Options Exchange's Volatility Index ("VIX"). The VIX is the market's so-called "fear gauge." It uses options to measure the expected future volatility in the S&P 500. As you can see, the VIX spiked to nearly 20 in April. That makes sense... The S&P 500 Index tumbled 5.5% in roughly a month around that time. And the other major indexes fell, too. But now, the VIX has cooled off. That tells us investors aren't feeling as skittish. In other words, we just passed through a period in which investors feared a lot of volatility. That's not the case today. As a result, investors will likely start making more "bullish" bets. That's why I think stocks can still run higher from here... I'm still "bullish" on stocks for the rest of 2024 – and beyond. Don't miss this opportunity. It's easy to be the first type of investor I mentioned earlier, the doom-and-gloom guy. But it's lucrative to be the second investor, buying stocks after a fresh all-time high. My advice today is to have your money in the stock market... Then just wait for the next, new all-time high. It should be coming shortly. Good investing, Jeff Havenstein
Editor's note: This bullish setup isn't the only positive development for the market right now. Marc Chaikin – founder of our corporate affiliate Chaikin Analytics – says a seismic shift is about to hit the markets... one that could lead to life-changing returns. But most investors aren't paying attention. That's why Marc recently hosted an online presentation to reveal exactly how you can start preparing immediately. Click here to catch up on the full details...
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