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- The Markets Are At All Time Highs... Should You Buy?
The Markets Are At All Time Highs... Should You Buy?
Decade Investor
May 17, 2024
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Happy Friday! In today’s email:
The S&P 500, Dow Jones & Nasdaq are all at all time highs… Should you keep buying?
Credit Card delinquencies increased to highest level in more than a decade
The Roaring Kitty has returned. AMC & GME stock respond.
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And more…
The Markets Are At All Time Highs… Does That Mean Keep Buying?
One of the things I have always said on social media was “I am happy to buy at all time highs”. Now that the 3 major indices (S&P 500, Dow Jones & Nasdaq) are at all time highs as I write this newsletter, I want to explain why it is okay to keep buying at all time highs.
It sounds counterintuitive to buy at all time highs.
We have always heard people say “buy low, sell high” so to buy at all time highs seems like a bad idea. It seems like you should wait for a pullback in the market before you buy. Why buy shares at all time highs when you can wait for the market to drop 10% and buy more. Well, let’s look at the data.
Wow. The data suggests that buying at all time highs is not as bad as it seems. The data is telling us that we may even get a better return when buying at all time highs?! WHAT!
According to the study, for the three time periods studied (1 year, 3 years, 5 years) buying at all time highs resulted in higher returns than buying on any other day. This is why I am okay buying at all time highs. Of course there is no guarantee this data will continue to look like this in the future, however until I see otherwise, I will be fine buying at all time highs.
My auto investing happens every Friday. This means there will be times when I buy at (or very close to) all time highs & other times when I buy when we are 10% below all time highs. However when I do have those times when I buy at all time highs, I do not freak out. I know long term I will be just fine.
Why does this happen?
Over the long term, the stock market goes up. It goes up MORE than it goes down.
The all time high prices that happened in 2005 will probably never be seen again in the market. The all time high in 2024 we are seeing now will probably not be seen again when we are in 2044, assuming the market does what it has always done… go up over the long term.
Does this mean all stocks will go up?
No. When talking about buying at all time highs I am talking about the overall market, not every single stock. Individual stocks are a different game than broad market ETF buying. Individual stock investing is different than broad market ETF investing.
All of this to say, if you are buying broad market funds, have a long term time horizon, and consistently add to your portfolio, buying at all time highs is not always a bad thing.
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Credit Card Delinquencies (90+ days) Have Increased to Highest Level in Over A Decade
Those who have missed their credit card payment in the past 90+ days has increased sharply in the first quarter. Not a good sign.
What is the takeaway? More people may be leaning on credit to afford their lifestyle & cannot make the payments. This will be something I will be following throughout the rest of the year.
Roaring Kitty Has Returned
Do you remember in 2021 when Gamestop and AMC stock turned people into millionaires overnight? Well, the guy who made the Gamestop short squeeze famous is Keith Gill, aka “Roaring Kitty”. Since 2021 his social media account on X has been quiet… until this week. He has since posted a series of videos & what is the result? GME was up 272% in a matter of days while AMC was up 300% in a matter of days.
What is the takeaway? Meme stocks can do crazy things. But they are insanely dangerous. You can make money quickly, but you can also lose money quickly. These stocks were up 272% & 300% respectively in just a few days, however the fall down the mountain will come quickly too. If you decide to play around with meme stocks, be sure to secure your profit.
Because right before I sent this newsletter out, these are the prices of Gamestop & AMC:
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