“There are substantial rewards for adopting a regular routine of investing and following it no matter what, and additional rewards for buying more shares when most investors are scared into selling.”-Peter Lynch
The S&P 500 has ended its streak of more than 24 months without reaching a record high.
While much of Wall Street celebrates, some investors may still feel disheartened after enduring serious hits to their portfolios over the past two years. Even as the formal bear market has ended, the joy of a new all-time high might be shared by few. So, what’s an investor to do?
My advice to investors: Tune out the noise. Instead, let’s delve into the market’s recent trajectory, explore stocks that linger in bear market territory, and pinpoint the focal areas for investors in 2024.
Image source: Getty Images.
The S&P 500 just closed its longest all-time high drought since 2012.
If the stock market still feels lackluster, it might be due to 2023 marking the first year in over a decade that the S&P 500 did not achieve a new all-time high. Take a look at the chart below:
The yellow line represents an all-time high in the S&P 500. When the line holds steady horizontally, no new all-time highs are achieved (such as the six years between late 2007 and 2013). Conversely, an upward movement of the line indicates numerous new all-time highs (e.g., 2021).
The market has just emerged from its lengthiest dry spell without all-time highs since the Great Financial Crisis.
In essence, 2023 was the first calendar year since 2012 that the S&P 500 did not witness a fresh all-time high.
What does it mean for investors?
While all-time highs might seem like a technical indicator with little value to investors, it’s important to recognize that they embody something more substantial: Many stocks plummeted from their 2021 highs, and quite a few have struggled to recuperate.
For instance, take PayPal Holdings. Shares of the fintech company have tumbled by 80% from their 2021 peak. Moreover, they continue to trend downward; the stock is down 17% in the last six months.
Even stocks that experienced a resurgence in 2023 remain far from their 2021 highs. Look at Tesla—between November 2021 and January 2023, Tesla shares lost over 73% of their value. While the shares have rebounded significantly since then (more than doubling in 2023), the stock still lags by more than 48% from its all-time high.
In essence, plenty of investors are disheartened as they review their portfolio statements—particularly those who did significant buying in 2021.
What should investors do about it in 2024?
Quite simply, heed Peter Lynch’s advice: Keep investing.
Here’s a tip that could aid you: Suppose you are optimistic about Tesla but disheartened that your shares have lost value since you bought them at their peak in 2021. By regarding the current price as a discount or a bargain, you may find it easier to bolster your investment. Each share bought today will cost roughly half of what it did in 2021. Moreover, purchasing shares at today’s prices will lower your cost basis. You can also employ dollar-cost averaging to set a schedule for accumulating shares over several weeks, months, or years—at least, that aligns with Lynch’s advice about adopting a regular investing routine and sticking to it regardless of market conditions.
Moreover, it’s possible you may no longer have a favorable outlook on Tesla or PayPal, or perhaps you never did. In that case, follow another of Lynch’s tips: Find a company whose products you admire, conduct research, and if you like what you see, begin investing there, because there is hardly a wrong time to invest in an exceptional company.
Moreover, as numerous studies have shown, trying to time the market doesn’t work. What works is consistent investing—come rain or shine, in bull or bear markets.
So, to sum up, 2024 heralds the dawn of a fresh bull market—an occasion to rejoice. Nonetheless, investors should not let this alter their overall investment strategy. Rather, it’s time to adhere to a “regular routine of investing and [follow] it no matter what,” as that’s a winning strategy in any market.
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Jake Lerch holds positions in Tesla. The Motley Fool possesses and advocates for PayPal and Tesla. The Motley Fool endorses the following options: short March 2024 $67.50 calls on PayPal. The Motley Fool maintains a disclosure policy.
