Many investors may be hesitant of buying at the top.
It feels reckless.
It feels like tempting fate.
And every time the market touches a new high, it seems like headlines warn that a crash must be next.
But history tells a very different story — and it’s far more encouraging for long-term investors.
Because data has repeatedly shown that:
All-time highs are a normal and healthy part of long-term market growth — not necessarily a signal that a crash is imminent.⁽¹⁾
Let’s look at what has actually happened when the market hit fresh highs before past recessions, and what today’s investors should learn from those episodes.
1. The Myth: “If Markets Are at All-Time Highs, They Must Crash Next”
It feels intuitive:
Markets are expensive → they must fall → buying now must be dangerous.
But historically, that’s simply not true.
Key Fact
The S&P 500 has spent a large amount of its history at or near all-time highs, because long-term market progress naturally pushes prices upward.⁽¹⁾
And here’s the part investors may underestimate:
After new highs, forward returns have often been positive
Since 1957:
The S&P 500 has been up one year later 71% of the time
The median return after 12 months later was +8.3%⁽²⁾
Since 1990:
- The S&P 500 has been at an all-time high more than 738 times
- Future returns are actually stronger than the at-any-time returns ⁽²⁾
In other words:
New highs are not always predictive of downturns.
They’ve actually more often been followed by continued gains.
Now let’s revisit the most famous examples.
2. Case Study: 1987 — New Highs, a Crash, and Then a Fast Recovery
In 1987, the market hit a string of all-time highs before the one-day “Black Monday” drop of over 20%.
But here’s what some forget:
The S&P 500 recovered all its losses within two years (21 months).⁽³⁾
Then it went on to a massive run in the 1990s.
The all-time highs before the crash weren’t a warning sign at all—just part of long-term market expansion.
3. Case Study: 1999 — The Tech Bubble Peak
The market set record highs throughout 1998–1999 before the dot-com bust.
This is often cited as an example of “buying at the top.”
And yet:
Some investors who bought the S&P 500 at the 1999 peak (the worst possible timing in the dot-com era) experienced a long recovery period but ultimately saw substantial long-term gains by 2020.⁽⁴⁾
Even investors who bought at one of the worst “peak buying” moments still ultimately moved back into positive territory over the long-term.
4. Case Study: 2007 — The Pre-GFC High
In October 2007, the S&P 500 hit a fresh high before the Great Financial Crisis.
The market fell more than 50%.
But again, the long-term outcome was surprising:
An investor who bought the S&P 500 at the exact 2007 peak recovered fully by early 2013 and experienced meaningful positive long-term returns since.⁽¹⁾⁽7⁾
The lesson wasn’t:
“Don’t buy at highs.”
It was:
“Don’t abandon a long-term plan during a downturn.”
5. Case Study: 2020 — New Highs Right Before the Fastest Bear Market Ever
In February 2020, markets hit new highs—weeks before the pandemic shutdown sent stocks down 34%.
What happened next?
The S&P 500 recovered to new highs again in just five months — the fastest recovery from a 30% decline in history.⁽⁵⁾
Buyers at the top returned to positive territory again—if they stayed invested.
6. What the Data Shows: All-Time Highs Are Not Always Predictors of Declines
All-time highs do not reliably precede crashes
They more often precede further long-term gains
Why?
Because markets tend to reach new highs during periods of:
economic expansion,
earnings growth, and
improving investor sentiment —
all of which are typically associated with periods of market strength.
7. What Investors Should Actually Do When Markets Hit New Highs
New highs shouldn’t trigger panic or market-timing attempts.
Stick to your long-term investment plan
Timing tops is nearly impossible—discipline helps you stay on track.
Rebalance periodically
Not to time markets, but to maintain your preferred risk level.
Separate short-term cash needs
Money needed in the next 12–24 months shouldn’t be in stocks.
Understand momentum is real
Academic research shows that momentum effects have historically contributed to market strength.⁽⁶⁾
Let your financial plan, not the headlines, guide your actions
The news cycle has never been a good investment strategy.
Final Takeaway
All-time highs feel scary.
They feel like danger.
But the data tells a different story:
All-time highs have historically been followed by continued long-term market gains—more often than crashes.
Buying at a high is usually not the problem.
Breaking discipline during the next downturn can be.
Staying diversified, patient, and committed to your long-term plan, has historically-and still remains-the best path forward for most investors.
If you’re unsure what today’s market highs mean for your retirement or long-term strategy, we help families build resilient, tax-aware investment plans designed to weather both euphoria and downturns. If you'd like a second opinion or a quiet conversation about your portfolio, we’re here to help.
This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Diversification does not assure a profit or protect against loss in declining markets. Investments are subject to risk, including the loss of principal, and there is no guarantee that any investing goal will be met. Past performance is no guarantee of future results. Talk to your financial advisor before making any investing decisions.
If you’re curious how markets have behaved in other surprising periods, these history-focused posts are a great next step:
A Brief Modern History of Surprise Fed Announcements
What Happened With High Inflation After WWII in 1946?
What Happens When Inflation Goes Down?
John Bogle: The Legacy of the Vanguard Founder
The Costly Fall of Fame: 5 Professional Athletes Who Lost It All
Sources & References
Federal Reserve FRED – S&P 500 Index (SP500)
https://fred.stlouisfed.org/series/SP500Ryan Detrick – https://x.com/RyanDetrick/status/1942060247817883806 and https://x.com/RyanDetrick/status/1891968184590246018
Federal Reserve FRED – Dow Jones Industrial Average (DJIA), 1987 Crash & Recovery
https://en.wikipedia.org/wiki/Closing_milestones_of_the_S&P_500
https://fred.stlouisfed.org/series/DJIA andNYU Stern – Historical S&P 500 Returns (Damodaran)
https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.htmlMacrotrends – S&P 500 Historical Chart (COVID Recovery Visible)
https://www.macrotrends.net/2324/sp-500-historical-chart-dataJegadeesh & Titman (1993) – Momentum in Stock Returns (Journal of Finance)
https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6261.1993.tb04702.x- https://www.officialdata.org/us/stocks/s-p-500/2007