With major stock market indicies recently reaching all-time highs, one may believe that stocks are overly expensive or the next crash is about to happen. Every day, there are articles written warning of a stock market bubble, or a financial pundit declaring the market is about to drop. However, new all-time highs are common, while market crashes rarely occur. According to Bloomberg, over the last 100 years, there has been an average of 12 new highs per year in the Dow Jones Industrial Average (DJIA). The average investor will see almost 500 new highs in their lifetime.
Going back to 1915, the average total 1-year return for the DJIA following a new high is 8.9%, with positive returns 70.6% of the time, while the average total 3-year return is 21.0%. In fact, the stock market spends about 7% of its time at a new high since 1950. If one has a long-term time horizon, trying to time tops can be hazardous to performance, with hindsight being the only way to truly tell of a market peak.
Throughout market cycles, GPM remains focused on selecting growing, high-ROE companies that we think trade at a reasonable price. We believe these companies have a high probability of delivering rewarding long-term growth in revenue, earnings, dividends, and ultimately, stock prices. We invest in businesses that are built to adapt and thrive, which gives us confidence to ride out market pullbacks and economic soft patches.
You can reach out to GPM to talk about your investments through our Contact page.