Highest high of all time

When did all-time highs become such a scary thought?

I’ve been noticing more headlines warning of corrections, crashes, and cataclysms because we’re at “lofty new highs”. After two decades where new highs in the market have been followed by big declines, I’m not surprised by the Pavlovian anxiety but I am puzzled how otherwise rational people aren’t doing the math.

All-time highs in the market are a good thing: they mean companies are going up, which is what we all want. Since 1950, there have been 1,100 all-time daily highs recorded, about one in every 15 trading days. Even better, all-time highs tend to cluster, so seeing one all-time high is usually a good sign you’ll see more. How good? Since 1974 76.5% of new all-time weekly highs have been followed by another new weekly high sometime in the next month. The probabilities are even higher when you look at individual stocks.

In non-geek that means if I see a new high this week, there’s a 76% chance an even higher high is coming sometime in the next month. I’m not saying a new high must occur, just that 3/4 times it has. Hardly something to get anxious about if you have a good strategy.

Plus, aren’t we all getting a little tired of the same market forecasters calling for big declines in 2010, 2011, 2012, 2013, and now 2014? The next time you read about an upcoming market crash, do a quick Google search and check up on the forecaster’s track record. Especially this guy: http://www.ritholtz.com/blog/2014/08/about-david-tices-60-crash-call/

Being good at investing is not about calling the tops and bottoms. It’s about having the discipline not to. Just follow the math.


Ben Kizemchuk is a Portfolio Manager & Investment Advisor with Altus Securities Inc. in Toronto. He offers financial planning and investment management for high net worth Canadian investors. Ben focuses on high quality investments, the Growth and Income Portfolios, low risk investing, and reducing tax.