After three years of remarkable gains, many fear the market could run out of steam in 2026.
The S&P 500 (^GSPC +0.75%) just wrapped up another stellar annual performance. After producing a total return of 26% in 2023, it followed up that performance with another 25% total return for the S&P 500 in 2024. And if that weren’t enough, the index provided investors with another 18% in total returns for 2025. Now, at the start of 2026, the S&P 500 is sitting near its all-time high.
However, with stock prices trading higher and valuations at elevated levels, many investors are concerned that 2026 might not be as auspicious. Fears of an artificial intelligence (AI) bubble and slowing job growth, combined with the current high stock prices, have many thinking the next bear market could be just around the corner.
But buying stocks when the S&P 500 hits a new all-time high has historically been a winning strategy. In fact, right now could be an excellent opportunity to put more cash to work in stocks.
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An immutable fact about every all-time high
While successful investing requires investors to look toward the future, there are some very important historical details that can provide more confidence in investor outlooks. That includes one simple, but easily overlooked, fact about every all-time high in the S&P 500: Every all-time high was preceded by a previous all-time high.
That’s certainly not a groundbreaking observation by any means. But it suggests an all-time high isn’t a warning that stock prices have gotten out of control and need to fall. In fact, the opposite is true.
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An all-time high is a signal from the market that the outlook for the future is bright. As a result, all-time highs tend to cluster together, with one new all-time high quickly followed by another.
Since the S&P 500 recovered from the 2022 bear market and hit a new all-time high in early 2024, the index closed at a record high 95 more times through the end of 2025. If you had gotten scared out by high prices in 2024, you would have missed out on the massive rise in stocks in 2025.
It shouldn’t be a surprise that investing in the stock market, whether at an all-time high or not, comes with positive historical average returns. That said, BlackRock analysts found that the average one-year return for the S&P 500 when it hits an all-time high is substantially lower than the one-year return for the index on all other days: 7.6% versus 8.8%. Interestingly, though, the average three- and five-year returns for investing at an all-time high are higher than investing on all other dates, suggesting trying to time the market as a long-term investor is fruitless.
Importantly, the expected return for investing at an all-time high is far higher than leaving money in cash or Treasuries. Treasury bonds may offer an attractive yield right now for capital preservation and inflation protection, but they won’t provide real returns anywhere close to stocks over the long run. Anyone looking to grow their wealth should be investing in stocks, even at an all-time high.
How to invest when the S&P 500 is at an all-time high
Finding great investment opportunities when the S&P 500 is at an all-time high can be difficult. Often, as is the case today, many stock valuations have expanded as stock prices rise, presenting less attractive potential returns for investors compared to alternatives like bonds and other asset classes. The S&P 500 forward P/E, for example, currently sits around 22, a level it has traded at only a few times in history.
Investors willing to dig into individual stocks may be able to find much better values in the market. What’s more, they may find that some stocks are deserving of above-average valuations, as they present excellent long-term prospects for growth. Building a diversified portfolio of quality companies with the financial fortitude to withstand (or thrive) amid economic downturns has been and will continue to be a great way to build wealth.
That said, not everyone has the time or inclination to research companies all day to determine which ones offer good value and fit into their portfolios. The simplest solution is to buy an S&P 500 index fund, like the Vanguard S&P 500 ETF (VOO +0.78%). With a low expense ratio and an excellent track record of closely tracking the index, investors can expect returns in line with the S&P 500. And if history is any guide, those returns will be pretty good over the long run, even if you buy at an all-time high.
While history suggests the S&P 500 and the rest of the stock market can keep climbing in 2026, investors need to be mentally prepared for the case in which it doesn’t. That means maintaining the same disposition required to invest when markets are at an all-time high: Time in the market is more valuable than timing the market.