NEWSFLASH: Stock market reaches all-time high! Now what?

Gary Alt |

I’m not sure who makes more money on the stock market – Wall Street or the media?  The stock market is a never-ending source of fresh news because it changes every day, and any writer worth the ink in her pen can spin that into a new story.  Whether the market is up or down by the slightest fraction of a percent, writers are trying to turn that into something more newsworthy than Lindsay Lohan’s latest brush with the law. That’s the nature of our 24x7 news cycle.

The latest news is that the S&P 500 stock index has reached an all-time high again this week. I say "again" because it's done this thousands of time since 1926. So what's newsworthy about that? Here's one headline we saw:

Investors cheer: S&P 500 hits all-time high (CNNMoney)

More dangerous headlines imply that you should begin worrying about what’s next, or that you should do something different with your investments.

Stock Market Hits All-Time High, Now What? (CNBC)
If S&P 500 hits 2000, what's the trade? (USA TODAY)

A few years ago, when the economy was gloom and doom and the stock market was suffering, a number of my clients told me they were so tired of the news that they just turned off the TV.  They were tired of listening to the negativity because they just wanted to continue living their lives and they knew that things would eventually get better.  They held onto their investments, knowing the market would rebound as it always has.

That same approach might be just as appropriate with this week’s new highs.  It’s not a reason to live life like it’s the Roaring 20’s.  I wasn’t alive during the Roaring 20’s but I hear it was quite a party.  The best advice is to continue living your life as normal, knowing that there will always be new highs and there will always be downturns.  Both are temporary.

See, the fact is that the market is doing exactly what it’s supposed to do.  Corporate profits are at all-time highs, and the economy is expected to continue growing.  Therefore the stock market should be at an all-time high.  The market is acting rationally right now. When investors expect profits to fall or the economy to slow, the market will retreat.  But we know the stock market has always outpaced inflation in the long-run.

There’s no need to do anything different unless your financial needs have changed.

So go on living your life.  Relax and put your energy toward things that matter to you.  Love your family.  Do something you enjoy.  Smile at strangers.  Eat healthily…most of the time.  And most importantly, turn off the TV.

Gary Alt is an Accredited Investment Fiduciary and CERTIFIED FINANCIAL PLANNER practitioner in Pleasanton, CA.  As fee-only investment advisors, Monterey Private Wealth serves the communities of Pleasanton, Dublin, Blackhawk, Danville, San Ramon, Livermore and the greater San Francisco Bay Area