So the market’s hitting new highs again, and suddenly everyone’s a philosopher. You’ve got two camps forming faster than people picking sides in a Twitter beef:
Team Bull: “Records are meant to be broken! Buy everything!”
Team Bear: “What goes up must come down! Sell it all!”
Both sides are throwing around psychology terms like they just finished their first semester of behavioral economics. Apparently, if you believe you’re in control of your destiny, you’re more likely to bet on hot streaks (hello, bulls). If you think the universe is basically playing cosmic pranks on you, you’re betting on mean reversion (sup, bears).
Here’s the thing though – I actually went and looked at the data instead of just arguing about it on Reddit.
What 100 Years of Market Highs Actually Tell Us
I pulled S&P 500 data going back to 1927 (yes, back when people wore actual hats) and found 35 instances where the market hit genuine new records. Not the “oh look, we’re up 0.01% from yesterday” kind, but the real deal.
The results? Plot twist incoming…
The bulls are mostly right. On average, buying at record highs gave you a solid 9.9% return over the next year. Not too shabby for supposedly “buying at the top.”
But before Team Bull starts doing victory laps, here’s the catch: those averages hide some absolutely brutal individual outcomes. We’re talking about the kind of losses that make you question your life choices and consider becoming a subsistence farmer.
Think about it – the 1928 record high was followed by the Great Depression. It took 25 years just to get back to even. Twenty-five years! That’s longer than most people’s entire careers.
The Real Story: It’s Complicated (Shocking, I Know)
Here’s what actually happens at market peaks:
The Good Times: Usually, high prices mean companies are actually making money hand over fist. Earnings have momentum, and that momentum tends to continue. It’s like a good Netflix series – when it’s hot, it stays hot.
The Bad Times: But high prices also create perfect conditions for spectacular face-plants. Remember 2021 when anything with “EV” in the name could raise billions? Most of those companies are now worth about as much as my collection of Beanie Babies.
The volatility basically doubles after new highs. So yeah, you might make money, but you’re also signing up for a roller coaster that would make Six Flags jealous.
So What Now?
Look, I still think there’s money to be made, especially in AI (the real kind, not the “we added a chatbot to our website” kind). But we’re entering the era of Physical AI – robots in warehouses, self-driving cars, the works.
The key is being smart about it. Don’t just throw money at anything with “AI” in the name. We’ve seen this movie before with dot-coms, then crypto, then EVs. Some will be Amazon, most will be Pets.com.
Bottom line: Market highs aren’t automatically good or bad. They’re just… high. What matters is what you do with that information. And maybe, just maybe, don’t bet the farm either way.