The tide is high (but I’m holdin’ on)

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  By Guest Blogger Doug Rowat

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As with many investors, ‘record high’ alerts popped up on my phone continuously last week:

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For some, this was good news and a harbinger of more record highs to come, while for others the immediate impulse was to take profits. Much of this reaction relates to the Monte Carlo effect, which implies that sustained winning streaks MUST reverse or that corrections are ‘due’ simply because the market has rallied. More on this in a moment.

However, usually such reflexive profit-taking equates to a poor investment decision.
First, it’s important to remember that record highs for the stock market occur constantly. Long term, the S&P 500 has averaged about 18 new highs per year, and during certain bullish timeframes that average is significantly higher. In the 1990s, for example, the S&P 500 averaged 31 record highs per year. Therefore, new highs are frequent events and, like most things that occur frequently, they shouldn’t command much of our attention.

Second, if you were considering adding to your portfolio on market strength, is your entry point necessarily worse because you’re investing at a record high? No. According to the Brompton Group, investing at a new high has historically resulted in similar or better returns compared to investing on any other day. To illustrate:

Average cumulative S&P 500 total returns

Source: Brompton Group sourcing LSEG Datastream data. Dale range: January 1, 1988 to August 28, 2025. “Invest on any day” represents average of forward returns for the entire period whereas “Invest at a new all-time high” represents average of rolling forward returns calculated from each new S&P 500 high for the subsequent 3-month, 6-month, 1-year and 5-year periods.

And, finally, what are the historical consequences of impulsively selling at a record high? Quite significant as it turns out. Research by international wealth management firm Schroders, reveals that a strategy of switching out of the US stock market and into cash (30-day US Treasuries) for the next month whenever the market hit an all-time high (and only going back in when it wasn’t at one) would have destroyed 90% of your wealth over the long term:

Ibbotson US Large-Cap Stocks Index (growth of US$100)

Source: Schroders sourcing Morningstar Direct data. Date range: January 1926 to December 2024. Cash represented by Ibbotson US (30-day) Treasury Bills.

So, this is the lesson of history: the stock market being at an all-time high should, in and of itself, not be cause for concern. But what is concerning is any reflexive assumption that the winning streak will end simply because it’s lasted. Such assumptions actually erode wealth.

They certainly did for some wealthy roulette players at a high-end Monte Carlo casino back in 1913. Here’s what I wrote here a few years ago about that particular event:

A commotion began when the wheel hit black a dozen times in a row. Bets began to pile up on red because the streak was, of course, now certain to end.

Unfortunately for these well-heeled gamblers, the streak continued and ultimately black was hit a stunning total of 26 consecutive times.

The thinking behind their betting was straightforward and tied to basic human nature: “It HAS to be red next time.” Unfortunately, what these gamblers failed to realize is that every spin of the wheel has to be assessed individually and that the odds of each spin carried an identical probability: 50/50. The principle of EXPECTED value was forgotten and an incorrect emphasis was placed on the historical ‘streak’, which actually had no bearing on the probability of the next spin.

Keep these gamblers in mind the next time a ‘record high’ alert flashes on your phone. Winning streaks can last longer than you think.

Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Investment Advisor, Private Client Group, Raymond James Ltd.

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About the picture: “Hi Garth, this is our border collie, Drew,” writes Owen. “He’s a rescue dog, born on a working ranch in southern Oregon. We got him when he was 18 months old and he is now about 7 years old. One day a few months ago, he disappeared in the woods behind our house, near Nelson BC. He emerged a couple of hours later with a ball, extremely proud of himself, and he has to show us his ball every time he gets a chance. I’ve no idea where he found it or what the circumstances were, but he sure seems to have great pride in his ball!

My wife Susan worked as a veterinary technician for 20 years before becoming an RN. She has a thing for uniquely naming her pets. No Buster or Maggie moniker would ever be allowed. When we first got Drew, we called him Buddy. This of course was just a placeholder name until a suitable name was found. We had noticed that every time the food scoop was filled up, Drew would produce great amounts of drool in anticipation of food filling his bowl. Kidding, I said to Susan, we should call him Drew, you know, because of the drooling. I was in no way serious, but wouldn’t you know, that is how he got his name. 

The photo of Drewe swiming was taken a few days ago on our front deck which overlooks Kootenay Lake and the Selkirk mountains. I really appreciate your take via the blog. Great stuff!”

To be in touch or send a picture ofk your beast, email to ‘turnergarth@gmail.com’.

Source: https://www.greaterfool.ca/2025/09/27/the-tide-is-high-but-im-holdin-on/