Sheesh, Netflix (NFLX) reports a great quarter, enthusiasm for AI remains high, and we get new record highs for almost everything again this week. Things were especially lusty for most of the big tech names, including AI darling NVIDIA (NVDA) and Alphabet (GOOGL) in our portfolio, but also Microsoft (MSFT), which just bumped up against a $3 trillion market cap for the first time and seems poised to finally overtake Apple as the biggest publicly traded company in the world. Even with Apple (AAPL) and Tesla (TSLA) lagging a bit to start this year, most of the big stocks are hitting new highs, and leading the indices to new highs and, more importantly, back to historically rich valuations… so what’s a cautious investor to do? NVDA is already up more than 20% just this year, for God’s sake, and even ol’ Warren Buffett’s up 10% this year, with Berkshire Hathaway (BRK-B) at all-time highs, and we haven’t even gotten to the Super Bowl yet!
Well, the truth is that markets usually keep doing what they’re doing — markets that are rising keep rising, and markets that are falling keep falling. Until something causes a big shift in sentiment, which nobody’s going to be able to predict very well. It’s not particularly unusual to see lots of “all time highs” in a given year — the market has mostly gone up, most of the time, even with all those scary downturns and crashes that many of us remember so well.
RBC posted an analysis a while back that noted there have been an average of 16 all-time highs for the broad market per year over the past 60 years — not so many in the 1970s, or in the 2000s, as those were “lost decade” periods when the overall market didn’t go up much and took a long time to get past prior “bubble” peaks, but the averages don’t lie. All-time highs don’t usually stay all-time highs for very long… and we’re now lapping the all-time highs that we hit during the market mania of late 2021 for the first time, so the highs could keep coming.
Yes, there’s the lingering fear that we could have another “lost decade” that mimics the 1970s, or the period from 2000-2012 (or worse, go through an extended malaise like Japan, whose 1990s “lost decade” became a market that really didn’t go anywhere for 20 ...