Bull & Baird: What a Run

It's August. Summer is winding down, school is starting, and everyone in the Midwest is tuning their snowblowers up for the inevitable pain to come. I thought it would be a good time to take a look at the stock market and see how it's doing.

• The S&P 500 is at all-time highs
• The equal-weight S&P 500 (reduces the influence of Tech) is also at all-time highs
• Small caps are at all-time highs
• Mid-caps are at all-time highs
• Europe is at all-time highs
• Emerging markets are close to all-time highs

That’s an extraordinary list. Since 2020, the S&P 500 is up almost 16% per year. That is FAR above the long-term average of 10%. And yet, if you spend enough time reading the news, you could be forgiven for thinking the world is ending.

Now is a good time to ask yourself: "How am I doing? Am I sticking to my plan and avoiding FOMO? How should I think about what's happening around me?"

A core tenet of investing is to maintain a long-term “buy-and-hold” strategy while resisting the temptation to time the market. You can't be afraid to invest in stocks when they're going up AND when they're going down.

So how do you do that? 

Investing isn’t as complicated as people think it is.  The hard part isn’t finding something to buy. It’s owning a sensible portfolio and then waiting. Waiting for companies and the economy to grow. Waiting for the storms to pass. The hard part is waiting while the world gives you a thousand reasons not to.

In just six years, investors have endured:

• A pandemic
• Multiple wars
• A bear market
• The worst inflation in decades
• Tariffs
• Election outcomes they hated
• Scares about commercial real estate, housing, jobs, the dollar, deficits, debt, and Social Security
• A thousand crash predictions, recession calls, and declarations that "this is the top" from random experts

Meanwhile, stocks (in aggregate) have risen at a rate far above their long-term average in those same six years. Why did the market keep climbing despite all of the reasons people worried?

There are plenty of explanations, but in my opinion one matters more than the rest: businesses keep adapting, innovating, and making more money. With AI, we’re watching an enormous technological shift happen in real time. Do you really want to sit out decades of innovation because this month’s headlines are scary?

Build a diversified portfolio. Pair it with a financial plan that governs saving and spending. Then comes the maddeningly simple part:

Wait.

“But Mike, what if I'm 70+ and can't handle a big decline in stock prices?” 

This is an important question, and it points to something we all need to consider: time frame. A bear market can happen at any moment, and they typically start when something in the world breaks. If you don't have a long enough time frame to get through it, or you can't handle a big decline in equity wealth, you simply shouldn't take as much risk as a younger investor might. Age-appropriate equity holdings are the cornerstone of smart financial planning.

But here’s the remarkable thing if you’re over 70. You’ve lived through one of the greatest periods of wealth creation in human history. You’ve seen brutal bear markets, bubbles, wars, recessions, inflation and financial crises—and the market kept going.

And you’re getting another bull market right now.

What a run.

As for the rest of us, the job is pretty simple. Keep investing as humanity keeps inventing, building and growing. Own enough stocks to participate. Own the right amount of risk for your life. Resist the urge to abandon the plan every time the world gets scary.

Then wait.

If we’re lucky, we’ll someday look back at decades of crashes, crises, inventions, and bull markets and think: What a run.

The information reflected in this post is an opinion and subject to change. Past performance is not a guarantee of future results. Diversification does not ensure profit or protect against loss. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances. Speak to your Baird Financial Advisor before making investment decisions.