With U.S. equity benchmarks hovering near record highs, it’s natural for investors—and by extension their advisors—to feel uneasy. A market at or near its peak can look precarious, as though one wrong step could send valuations tumbling down the mountain. The fear of heights in investing is real: what if the next correction wipes out hard-earned gains?
This question has been top of mind for many clients, especially after the S&P 500 notched yet another all-time high. At such junctures, advisors often face the challenge of balancing client caution with the evidence of history. According to AllianceBernstein, which oversees roughly $785 billion in assets, data suggest that staying invested at record levels has historically proven to be as beneficial—if not more so—than waiting for a dip that may never materialize.
Dispelling the “Peak” Myth
AllianceBernstein’s research addresses a persistent myth: that new highs in the market inevitably signal an imminent downturn. The firm analyzed more than 11,000 trading days since 1980 and found the assumption simply doesn’t hold up. In fact, investing at new highs has generally produced outcomes similar to, and sometimes better than, investing on an average day.
The numbers are compelling. An investor who put money to work on a day when the S&P 500 reached an all-time high saw an average one-year return of 10.5%. That’s identical to the average return when investing on any random day in the same 45-year span. The probability of a positive one-year return was 78% in both cases.
Stretching the horizon to three years, the advantage shifts slightly in favor of buying at market highs. From such entry points, average three-year gains totaled 36.7%, compared with 33.8% for a random day. Positive outcomes were also frequent: 87% of the time, investors who bought at all-time highs had gains after three years, versus 94% of the time for those who invested randomly.
For advisors, this is a crucial point when counseling clients wrestling with the psychological barrier of buying into a strong market. History suggests that avoiding equity exposure out of fear of “buying at the top” can mean missing out on significant compounding.
The Role of Earnings Growth
AllianceBernstein attributes much of this resilience to the steady force of earnings growth. While markets fluctuate in the short term due to macroeconomic shocks, geopolitical events, or shifts in sentiment, earnings ultimately set the trajectory of stock prices.
“Equity markets may face volatility for various reasons, from macroeconomic stress to geopolitical turmoil. Yet over the long term, stock prices are ultimately driven by earnings performance,” the firm noted. Earnings, once on an upward path, typically don’t stop abruptly. Instead, they build momentum, decelerating gradually rather than collapsing overnight.
This earnings-driven framework is vital for advisors constructing long-term allocation strategies. When corporate fundamentals remain intact, market highs are often not signals of fragility but reflections of continued growth.
A Cautious but Constructive Outlook
Of course, no two cycles are identical, and risks remain. AllianceBernstein itself cautions that while the data favor further upside, investors must account for evolving conditions that could stall momentum.
One of the more pressing risks in the current environment is a weakening labor market. The latest Bureau of Labor Statistics report showed the U.S. added just 22,000 jobs in August—its weakest print in years and the fourth consecutive month of tepid growth. Although the unemployment rate ticked higher only slightly, the slowing pace of job creation hints at cracks in the labor foundation. Markets took notice, with equities pulling back on the news.
A softening labor market is especially relevant for advisors managing retirement portfolios, as it could signal a deceleration in consumer spending, earnings, and ultimately corporate profits. Coupled with ongoing inflation challenges and tariff-related cost pressures, these dynamics underscore the need for balanced portfolio construction.
The Inflation and Fed Equation
Inflation remains another complicating factor. Despite some progress, getting inflation back to the Fed’s 2% target has proven elusive. Rising tariffs add another layer of concern, threatening to push consumer prices higher. These pressures have already interrupted the Federal Reserve’s rate-cutting plans this year.
Still, consensus suggests that the Fed may resume easing soon. The central bank is expected to cut its benchmark rate at its September meeting—a move that would extend policy support to markets. Historically, accommodative monetary policy has helped sustain equity rallies, even when economic conditions appeared mixed.
Mo Haghbin, head of strategic ETFs at ProShares, put it succinctly in an interview with Business Insider: “I don’t see a big drawdown in equity markets. Anytime you have an accommodative Fed, if you look at history after the first rate cuts, markets tend to do pretty well.”
For advisors, this environment presents both challenges and opportunities. The interplay between sticky inflation, a cautious Fed, and evolving labor trends requires vigilance, but accommodative policy provides a supportive backdrop for equities in the near term.
Why Sitting on the Sidelines Can Hurt
Despite these uncertainties, AllianceBernstein emphasizes that staying on the sidelines because markets are at record levels may mean forfeiting attractive opportunities. “We think that opting to stay on the sidelines simply because markets are reaching new highs could be a missed opportunity,” the firm said in its report.
This perspective is particularly important for clients who remain under-allocated to equities. While it’s human nature to want to wait for a pullback, history suggests that investors who wait often find themselves buying at even higher prices later.
Advisors can use these insights to help clients frame the current environment not as a peak-to-avoid but as part of an ongoing earnings-driven cycle. Allocating gradually through dollar-cost averaging, diversifying globally, and maintaining exposure to growth sectors can all help mitigate entry-point risk while still participating in upside potential.
Implications for Portfolio Construction
For wealth advisors and RIAs, the AllianceBernstein findings reinforce several actionable strategies:
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Combatting Behavioral Biases: Clients frequently equate record highs with elevated risk. Advisors can counteract this bias by presenting the historical evidence: investing at highs has not statistically increased the likelihood of poor returns.
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Encouraging Long-Term Horizons: By reframing the discussion around earnings growth and multi-year performance, advisors can keep clients focused on the durability of compounding, rather than short-term volatility.
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Maintaining Diversification: While U.S. equities have led in recent years, international markets, alternative assets, and fixed income all have roles to play. Diversification helps mitigate the risks of any single market cycle turning negative.
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Using Policy as a Guide, Not a Guarantee: With the Fed likely to resume cutting rates, the environment is favorable for risk assets. However, advisors should caution clients against overreliance on central bank support as a one-way ticket to gains. Policy is a tailwind, not a safety net.
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Planning for Labor and Inflation Risks: Advisors should model scenarios where weaker employment and sticky inflation weigh on growth. Stress-testing portfolios under these conditions can help ensure clients are prepared for downside scenarios.
Keeping Perspective in a High-Market Environment
The psychology of investing near highs can be as challenging as the numbers themselves. Clients often fear regret more than loss: the regret of buying at the “top” only to watch the market slide. Yet the data suggest that such fears are often misplaced. More often than not, markets continue climbing, powered by earnings and supported by policy.
For advisors, the key is to translate this into disciplined action. That doesn’t mean dismissing risks; rather, it means contextualizing them within a broader historical framework. Caution should not become paralysis.
Conclusion
Markets near all-time highs can make investors nervous, but history tells a different story than the fear narrative suggests. AllianceBernstein’s research shows that investing at market peaks has historically delivered results in line with, or slightly better than, investing at random times. Earnings growth remains the engine of long-term equity performance, and accommodative monetary policy continues to provide support.
While risks like a weakening labor market, inflation pressures, and geopolitical uncertainty must be managed, the lesson for advisors is clear: waiting on the sidelines can be more damaging than participating. Helping clients understand this dynamic—and positioning portfolios accordingly—remains one of the most important roles wealth advisors can play in today’s market environment.
In short, peaks are not necessarily precursors to falls. More often, they are signposts along the climb of a durable earnings-driven cycle. For RIAs and wealth managers, reminding clients of this historical truth can turn fear of heights into confidence in staying the course.
