Lessons from a Market High

When things are going really well, be sure to notice it.  The S&P 500 has set 18 new closing highs this year.¹ While the stock market historically delivers positive returns over the long term, no one can guarantee that the stock market will continue to rise. Short-term fluctuations are common, both up and down. We experienced the most recent downside shock in April, but now and then, the market can deliver a doozy of a downturn, as we experienced from 2000 to 2002.²

When markets are falling, people pay attention. There are lessons to be learned from a meltdown in the market, but the same can be said for a rising market. These lessons, learned through experience, can make you a better investor and prove valuable when looking at the road ahead.

1. Goals change as we move through different stages of life and over time. 
   What are the goals for your portfolio? Are you saving for retirement, looking to buy a house, preserving an inheritance, investing for income, growing assets for the next generation, or maybe some combination? Are your goals short-term, mid-term or long-term? Does your portfolio match your goals? Revisiting these questions as market euphoria rises or before a downturn occurs will provide greater financial and emotional stability during periods of change.
2. Market volatility is here to stay. 
   In 2025, the S&P 500 moved more than 1% in a day approximately 25% of the time.³ This means that one out of every four trading days has seen a 1% or greater move. For most of us, this suggests that we should trade less, hold longer and tune out the day to day explanations of market activity.
3. Know your investments and review your statements, not just the end of month value. 
   An informed investor is a better investor. If you are not confident in your own investment knowledge and skills, seek out an advisor and be sure to ask questions. An advisor should be willing to answer questions in a way that is understandable and to the point. Understanding performance, fees, and investment strategy are essential to achieving long-term investment success.
4. Be skeptical of new and often popular, but complicated, investments. 
   Many new and seemingly sensible ideas work until they don’t. All investments carry some level of risk, and any complex investment is vulnerable to unusual events. Many new products overpromise, underdeliver, and a rising market can obscure unexpected structural problems and issues.
5. Money and investment products are increasingly global. 
   Due to the depth and stability of U.S. markets, we have a long history of statistical market research and fundamental stock and bond analysis.  Looking backward at that research provides a sense of predictability, but “uncertainty” still reigns supreme. Globalization has created a host of new opportunities, risks and vulnerabilities – which also leads to a greater potential for volatility, both to the downside and upside. One long-held concept remains true, higher potential gains come with higher potential losses. There are many new factors and decision makers participating in the world markets today.
6. Diversification does matter. 
   The U.S. stock market has experienced a long period of outperformance, driven by economic strength, innovation, a supportive environment, and the dominance of the dollar in global markets. As a result, it is likely that portfolio risk has grown as well, think tech stocks, tax avoidance, and the gradual growth in equity allocation. It is important to recognize that financial markets can change abruptly through monetary policy changes, sector rotations, and many other factors. Diversification across asset classes and geographies remains a key strategy for managing risk and maximizing long-term returns.

While the question remains as to where else you might want to hold or invest your money, isn’t it better to have these conversations when the market and economy have shown such resiliency, as opposed to periods of financial crisis or threatened financial hurricanes?

Meet Glen J. Buco, CFP^® »

Read the August 2025 Financial Planning Focus:

• "How Do You Manage Your Retirement Plan?" by Kristan Anderson, CEBS^®, CFP^® »
• "Planning for the Inevitable" by Alan R. Menase, CFP^® »
• "What Happened to ESG?" by Matt Armendaris » 

Sources: 

¹ As of August 16, 2025.

² Slickcharts.com: In 2000, the index had an average annual loss of 9.10%. This decline continued in 2001 with a further drop of 11.89%. The worst year was 2002, with a substantial 22.10% loss.

³ Spglobal.com through July 2025

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