I know I have rather inundated you with ‘Round Robin’ emails this month, but I thought the following was too important a message not to share.
The FTSE 100 and the S&P 500 in the States have delivered double-digit returns this year.
And while that’s great news for investors, it does have a drawback:
The over-use of the phrase “All-Time High”.
There are two problems with it.
First, the phrase itself (and it’s abbreviation “ATH”). It’s just a bit… American… isn’t it? No self-respecting, bowler-hat wearing, umbrella toting British investment index should be boasting so crassly*…
Surely the more appropriate response is something like this?
Source: Monty Python
Secondly, there’s the attention and emotion the phrase creates.
Because an “all-time high” sounds important. It feels like you should do something, right?
And often, we hear from clients in these moments, wondering if they should sell as “the market is near its peak” or something to that effect.
But markets aren’t mountains! It’s not a case of reaching the top, then having nowhere else to go! We’ve written about this before, but we think it’s worth repeating.
Stock markets should keep reaching higher levels as time goes on – that’s what investing is all about!
In fact, a new high point is usually a stepping stone, rather than a ceiling. A comparison of the UK and US markets makes it clear.
After the dot-com bubble burst in 2000, it took the FTSE 100 until February 2015 to climb back to its previous high point.
In the ten years since then, it’s reached a new high point 84 times (the orange vertical lines – some of them are really close together). That’s an increase of about 33%…
Source: 7IM/Factset. Past performance is not a guide to future returns.
… and here’s the same chart for the US market. 315 new highs since February 2015; for a return of nearly 200%.
Source: 7IM/Factset, Past Performance is not a guide to future returns
Its not just that new highs are normal. It’s that you NEED them for growth.
So, if we’re going to come over all American about it, might as well go full Miley Cyrus:
Ain't about how fast I get there…
Ain't about what's waiting on the other side…
Source: Miley Cyrus
As always, if you have any questions—about this topic or any other aspect of your financial planning—don’t hesitate to contact me. And if you know someone else who may find this information useful, feel free to pass it on.
Yours sincerely,
Graham Ponting CFP Chartered MCSI
Managing Partner
