Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Data from Refinitiv suggest that there have been 621 peaks on the S&P/TSX Composite Index since the 1970s and 18 thus far in the 2020s.

Henrik5000/iStockPhoto / Getty Images

Despite a global pandemic that has led to countless job losses and much uncertainty, stock markets have once again reached new all-time highs. Although that has provided many investors cause for celebration, it has made others wary.

For some investors, it’s not easy to invest when stock markets hit new highs as they fear equities are at, or close to, a peak, and a crash could be on the way. However, the reality is investors will see new all-time highs on stock markets many times during their lifetimes.

Although predicting stock markets’ short-term performance is impossible, good financial advisors can help their clients by providing the following five recommendations during emotionally charged times when markets hit a new historical peak.

Story continues below advertisement

1. Accept that all-time highs are normal

Understanding that new record levels are not in any way odd occurrences that should make investors nervous is the first things advisors can do to help their clients.

The easiest way to explain this fact is by showing a chart of stock market returns since inception, illustrating that markets will go up over time, with new all-time highs along the way.

If clients need even more persuading, you can also show them the table below, which reveals just how many peaks the S&P/TSX Composite Index has reached since the 1970s.

All-time highs in the S&P/TSX Composite Index

DecadeTotal highs

Source: Refinitiv; Produced by National Bank Financial Wealth Management

*As of Jan. 7, 2021

2. Prepare yourself mentally

There’s an interesting parallel to be made between gambling and all-time highs on the stock market, and it relates to the gambler’s fallacy.

This concept describes the belief that the probability of a random event occurring in the future is influenced by previous instances of that same event.

Story continues below advertisement

For example, if someone goes to the casino, spins the roulette, and wins by betting the ball will land on red three times in a row, the brain will suggest that’s it’s too risky to bet on red again because it has just won so many times. The problem with that line of thinking is that previous spins of the roulette have no bearing on the result of the next spin.

The same can be said about stock markets reaching new highs. Many investors don’t want to invest when markets continue to produce gains because they’re worried the streak will stop.

However, if investors have a long-term view, that should not matter. Good advisors can help them realize that.

3. Look to historical events

As stock markets suffered massive declines after reaching all-time highs in 2000 and 2007, investors tend to associate these periods with terrible returns.

However, many people are surprised when they see the table below because, contrary to popular belief, the short-term returns of the MSCI World Index are higher when investing during all-time highs than during any other day.

Story continues below advertisement

Historically, all-time highs have been followed by even more record highs. Although timing the market is extremely difficult to do as stock market peaks only represent about 6 per cent of trading days, this information does reveal that these events are not necessarily followed by big drops.

Performance of the MSCI World Index

Average total returns (%) from Jan. 1, 1972 to Jan. 7, 2021

Following all-time highFor the entire period
Three months4.62.6
Six months8.55.3
One year15.410.8
Three years40.337.1

Source: Refinitiv; produced by National Bank Financial Wealth Management

4. Rebalance your portfolio

One time-tested approach to dealing with stocks reaching new highs is to rebalance clients’ portfolios. That strategy is one of the best ways to ensure that portfolios remain diversified over time.

Advisors will not always have an easy task when doing so as it means clients will need to accept you’re asking them to sell the asset classes that might have performed exceptionally well and buy the assets classes that have not.

Diversification leaves investors equally grateful and regretful, but it will increase the odds they stay invested over time.

5. Don’t wait for a correction

Story continues below advertisement

One of the most difficult things about investing is that there is always something to worry about. If investors don’t want to invest following a new all-time high, a great question an advisor could ask them is, “If not now, then when?”

If investors tell their advisor they’re waiting for a big correction, advisors can then provide some perspective. When stock markets crash, like they did last February and March, it often feels like the pain will never end. So, investors postpone their decision to invest yet again.

Market-timing simply doesn’t work, and one of the consequences is that investors who try to do that end up running out of time before they run out of money. All bear markets will be traced back to a peak, eventually, but that will only be known with the benefit of hindsight.

Jonathan Durocher is president of National Bank Financial Wealth Management.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to
Comments are closed

We have closed comments on this story for legal reasons or for abuse. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies