Stock market: History shows record highs aren't a bad time to buy

The S&P 500 (^GSPC) has been puffing to new highs daily for the past week.

And while investors may worry about buying the benchmark at its highest level in history, a historical chart from eToro US investment analyst Callie Cox shows there's actually no better time to enter the market.

The chart shows that money invested at all-time highs on average performs better over the next year than money invested on a given day.

"History has shown us time and time again that all-time highs often lead to more all-time highs," Cox told Yahoo Finance.

Cox noted that the market action over the past week (where the S&P 500 hit a new record and then continued to reach new highs In the days that follow, it's pretty standard. About 80% of the S&P's records since 1950 have led to at least one more all-time high the following week, according to Cox's analysis.

"A lot of people think that the market goes up and down, and you know, if it's an all-time high, well, it's going to go down," Peter Mallouk, CEO of Creative Planning, told Yahoo Finance. "And that's not really how the market works. The market generally goes up. It just has periods when it goes down."

Mallouk said investor sentiment can often drift into a simple theory that what goes up must come down. However, this goes against the general trend of broad stock indices, which in the long run They have risen more. And although it may not seem like it, since the markets It only took almost two years to reach new highs.markets in general hit a new all-time high every 19 days, according to Mallouk.

"The key is to deploy your capital," Mallouk said. "If you're sitting on the sidelines, you're much more likely to be worse off than someone who has invested and runs into a market of doubt right after investing."

And for many, the current market environment still has reason to rise before the market falls. The S&P 500 officially entered a bull market in June. But the bull market's first record came only in January. History shows that since 1950, bull markets have lasted an average of four and a half years since stocks reached the first new high. Not to mention the long pauses between all-time highs like the ones the market just experienced. They usually produce enormous returns.

But the argument for the stock goes beyond the historical numbers. Cox also highlighted the current economic backdrop as a bullish setup for stocks. The US economy has just closed 2023 with another upward surprise in economic growth. Consumers they are still spendingand although it shows some signs of cooling, The labor market remains tight.

"We see a market anticipating rate cuts with the added context of a strong economy," Cox said. "That's a very good setup for the stock."