It’s been a very eventful year so far.
A major war, severe disruption in energy prices, inflation, the sudden threat of higher rather than lower rates, equity valuations near historic highs, a large drop in Bitcoin and precious metals, giant leaps in AI capabilities, and by far the biggest Initial Public Offering (IPO) in history (SpaceX). And with this, the stock market has continued to march forward. Year to date through July 31st, the US Stock Market is up 10.9%. That’s following 3 years of double-digit gains: 26.3% (2023), 25.0% (2024), and 17.9% (2025) 1. And, it’s not only the US stock market that is growing at a high clip this year. International stocks are up 14.4% 2, Emerging Market stocks are up 20.2% 3, and US Small Cap stocks are up 18.8% 4.
Many clients we have talked to this year are wondering how much longer this bull market can run. The honest answer is that no one knows. That includes people in the media that get paid to sound certain about their predictions.
Now, it’s certainly true that there is some cause for concern. The forward price to earnings ratio on the S&P 500 is 19.6, compared to its 30-year average of 17.2 5. In plain English, that means stocks are expensive compared to the profits companies are expected to earn. But that doesn’t mean a crash is imminent. It does mean that there is little room for error. And the market has become quite volatile because of this.
So, what should we as investors do given this information? Before I answer that, I want to tell you a story.
The Smartest Guy in the Room
On the evening of December 5, 1996, Alan Greenspan, then the Chairman of the Federal Reserve, gave a speech that people still talk about 30 years later. He asked “But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions?” 6
That was a warning from one of the smartest economists in the world. He had better economic data in front of him than most investors and he was right. Stocks were expensive, relatively. And eventually his warning came to fruition. He was just early by over 3 years. The S&P 500 closed at 744 the day of his famous speech and didn’t peak until March 24, 2000 at 1,527. In between, it had more than doubled.
In investing, being right and being early are the same thing as being wrong. Let’s walk through an example of how timing the market can cost you.
Hop in the Time Machine
It’s December 4, 1996 and you just received a $100,000 bonus that you’re planning to invest.
The next night, the Chairman of the Federal Reserve goes on record saying stocks are dangerously overpriced. So, you decide to take that warning and wait for a better entry point.
The better entry point doesn’t show up. The market continues to climb through 1997, 1998, and 1999. Eventually, you can’t take it anymore. You’ve spent three years watching everyone around you make money while you sat on the sidelines being careful, and the fear of missing out beats the fear of overpaying. You invest $100,000 into an S&P 500 index ETF (SPY) 7 on March 24, 2000, which turns out to be the exact top of the market.
Then, things get ugly. The S&P 500 declines 46.5% peak to trough. It eventually recovers, but not too long after we go through the Great Financial Crises of 2009 and your investment decline 55.2%. While these declines were gut wrenching, you hold on and do not sell. You are rewarded as the market continues to appreciate through the 2010s. Then, COVID happens in 2020, and your investment drops by 29%. It recovers, but then in 2022 the economy experiences a sharp increase in interest rates and inflation and your investment declines by 24.25%. Four separate times you see your declines of more than 20%.
As of July 31, 2026, your $100,000 investment in SPY (with dividends reinvested) would have been worth $775,000. That works out to an 8.08% annualized return during that time frame, despite investing at one of the worst entry points in modern history!
Now, let’s assume you didn’t hear that speech in 1996 and went ahead and invested the $100,000 on December 5, 1996 into SPY. In that case, your investment would have grown to $1,668,000 with dividends reinvested. That’s a 9.96% annualized return and provided you with $893,000 more money in your account!
What We Actually Do
As you can see, timing the market is hard and trying can be expensive. So, we don’t. We keep investing, and we let business ownership do what it has always done: serve customers, earn profits, pay some of those profits out as dividends, and reinvest the rest into finding new ways to do it again. That cycle is why the stock market goes up over the long run.
We will continue to have drawdowns in the market, and the headlines will be scary. But that volatility is the price of admission. It’s why the market earns a premium return over safer investments such as bonds and cash.
We will continue to invest with these principles on your behalf. If you have any questions or want to talk about your investment portfolio, please don’t hesitate to call your advisors.
Hypothetical illustrations. Growth of $100,000 invested in SPY (SPDR S&P 500 ETF Trust) with dividends reinvested, measured from March 24, 2000 and from December 5, 1996 through July 31, 2026. Peak to trough declines of 46.5% (2002), 55.2% (2009), 29.0% (2020), and 24.25% (2022) reflect the S&P 500 over those periods. These illustrations do not reflect the deduction of advisory fees, taxes, or transaction costs, which would reduce returns. An investor cannot invest directly in an index. Past performance is no guarantee of future results
