In case you hadn’t noticed, the S&P 500 index reached record territory yesterday (July 11), and the Nasdaq briefly crossed over the 5,000 level before settling back with a more modest gain. At 2,137.6, the S&P 500 finished above the previous high of 2,130.82, set on May 21, 2015.
SRI investors want to make a positive difference with their money, but they also want to experience some positive gains financially, so it’s nice to see the markets recover. We’ve waited more than a year for the markets to get back to where they were before the downturn this January, before Brexit, before a lot of uncertainties in the last 12 months. But a market top can suggest a different uncertainty; after all, many investors regard market tops warily. When stocks are more expensive than they have ever been (so goes the thinking) it might be time to sell and take your profits. However, if you had followed this logic in the past and sold every time the market hit a new high, you’d probably have been sitting on the sidelines during most of the long ride from the S&P at 13.55 in June 1949, which was the bull market high after the index started at 10. New highs are a normal part of the market, and it is just as likely that tomorrow will see a new one as not. In fact, the Dow is approaching another all-time high of its own right now. Overall, the market spends roughly 12% of its life at all-time highs.
We all know the next bear market will start with an all-time high, but we can never know which one in advance. Market highs do not necessarily become market tops. The smart advice for SRI investors is the same whether the markets are up or down. Save, invest your savings in potentially profitable businesses that might also improve society and the environment, and stay invested for the long term. So yes, let yourself relax and celebrate the highs when they come.
Information about market indexes was obtained from sources we believe to be reliable, but we cannot guarantee its accuracy. Indexes are unmanaged groups of securities and are not directly available for investment. Past performance does not guarantee future results.
Adapted by Gary Matthews from a Bob Veres draft, with permission.