With stock markets at record highs, is the market at a peak?

During periods of strong stock market returns, headlines can cause investors to wonder whether such periods signal an impending downturn or poor future returns at some point. However, history suggests that this fear, whilst common, is often misplaced.

Markets reaching an all-time high is not unusual – in fact, it happens regularly and is a reflection of investors being rewarded for taking on the risks of stock ownership. It’s certainly not a warning sign.

‘Since 1926, the US market has ended on a new high in about one out of every six weeks’

Dimensional Fund Advisors^[1]

This is not to say that markets will not fall as they will do, and they can fall with unexpected speed and magnitude. However, attempting to predict when a high will turn into a decline is not only extremely difficult, but getting it wrong can be costly. The reality is that no one possesses the ability to consistently and accurately time the market.

One tool investors possess to protect investments against declines is time. To provide context, the chart below illustrates seven major stock market crises over the past century, showing performance from peak to trough and, below, showing that – in most cases – ten years later, portfolios had recovered and grown in real (inflation-adjusted) terms. The fact that not all periods show a positive outcome over the 10-year term illustrates the lack of any implicit guarantees – this risk is why investors are typically rewarded handsomely in the long run.

Figure 1: Market crises look different through a long-term lens

Source: Albion Strategic Consulting. Data source: Albion World Stock Market Index © https://smartersuccess.net/indices. In USD, after inflation.

As an example, if we take the credit crisis starting in November 2007. The stock market fell until February 2009, at which point it was 55% lower. Looking at the ten years from November 2007 to October 2017, global stocks had risen by 29%, taking inflation into account. Even if you had invested at the worst possible time, given enough time (and inaction), your investment will have recovered and gone on to provide a return in excess of inflation.

Markets are inherently unpredictable. On any given day, they are roughly as likely to rise as they are to fall. Over five-year holding periods, returns of stock markets have fallen short of inflation 1-in-5 times^[1] – a reminder of the risk that comes with investing.

However, the longer an investment is held, the greater the opportunity for expected outcomes to prevail. The investing journey comes with large steps forward and back – that is the nature of the game.  Those who can look at investing through a long-term lens can cut through the headlines and take comfort that stock markets are doing heavy lifting for them in the long run. The message is simple – stay invested.

[1] Data source: Albion World Stock Market Index © https://smartersuccess.net/indices. In USD, after inflation. Jul-26 to Dec-24.

[1] Dimensional Fund Advisors (August 2025), ‘The Informed Investor’ podcast, ep. 6