Shouldn’t stock market record highs be commonplace?

Factual Questions
41

Here’s a count of S&P 500 highs:

→ year = 1990 6
→ year = 1991 22
→ year = 1992 18
→ year = 1993 16
→ year = 1994 5
→ year = 1995 77
→ year = 1996 39
→ year = 1997 45
→ year = 1998 47
→ year = 1999 35
→ year = 2000 4
→ year = 2001 0
→ year = 2002 0
→ year = 2003 0
→ year = 2004 0
→ year = 2005 0
→ year = 2006 0
→ year = 2007 9
→ year = 2008 0
→ year = 2009 0
→ year = 2010 0
→ year = 2011 0
→ year = 2012 0
→ year = 2013 45
→ year = 2014 53
→ year = 2015 10
→ year = 2016 18
→ year = 2017 62
→ year = 2018 19
→ year = 2019 35
→ year = 2020 33
→ year = 2021 70

Most recent years have plenty of SP500 highs during the year. Then you get those long dry spells where those who invested their life savings at the tippy-top of the market peak are under water. Savvy low-effort investors dodge the problem with dollar cost averaging. Check it out: assume an investor buys $100 of shares per period.

P = 10: buy 10 shares, invest $100
P= 11: buy 9.09 shares, invest $100
P = 9: buy 11.11 shares, invest $100

Years later, the stock closes at $10. Investor had purchased 30.2 shares for $300, which are now worth … $302. Volatility was this long term investor’s friend: they made a small gain even though the price at the end was the same as the price in the beginning. Best of all, you can set up these automatic investments with your mutual fund company, then ignore the funny papers.

42

If you follow the Tokyo market, its Nikkei index recently made a new high. That surpassed the last high made in December, 1989. That’s over 34 years between highs.

In comparison - the Dow took only 25 years to recover from the 1929 crash.

43

I suppose that’s a result of Japan’s long history of deflation since the 1990s. Stock indices are calculated on the basis of nominal prices, so a market in a deflationary environment will have difficulties reaching a new height, whereas an inflationary market will reach new records all the time. Doesn’t say much about how well stock investors do in real terms.