Jun 19 • 4 min read
The bull market nobody trusts
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Everyone knows it's hard to stay invested when markets are falling. Fewer people realize it can be just as hard when markets are rising. The temptation simply wears a different disguise. Take some profits, lock in the gains, get out before the pullback everyone's so sure is coming. And with the market near all-time highs, that temptation is everywhere right now. In today's email:
*** Before we dive in, did you catch this week's podcast? 👇 Why Bull Markets Are Harder Than They LookHoward Marks captured the feeling in a 2015 memo: "When you look at the chart for something that's gone up and to the right for 20 years, think about all the times a holder would have had to convince himself not to sell." That's the challenge of being a disciplined, long-term investor. The urge to sell rarely arrives as panic; it arrives as a reasonable-sounding idea. Lock in the gains, take a little off the table, rotate into something with more upside, step aside before the drop... Every Gain Has Come With a Reason to SellConsider the bull market that began in 2009. Look at how many times an investor would have had a perfectly good excuse to head for the exits:
And those are just the headlines that made the front page. Yet since 2009, the U.S. stock market has returned more than 15% annualized — roughly 50% higher than its ~10% average over the last 100 years. 2026 has been more of the same. We've already weathered fears about AI replacing jobs, conflicts involving Venezuela and Iran, renewed inflation worries, and a spike in oil prices...and the year isn't even half over. As I write this, the S&P 500 is up 10% year-to-date. Even measured from the start of the Iran conflict, stocks are up more than 5% about 100 days later. Then came the last couple of weeks. Tech stocks fell almost 5% in a single day (their worst day in 14 months) and the headlines quickly pivoted to a new worry: "Maybe AI is not as transformative as everyone thought." It's worth remembering what happened right before that drop... A 47% gain over nine weeks, the biggest nine-week run for any sector on record. "But Aren't We Near All-Time Highs?"If your instinct right now is to trim stocks because the market feels too high, you're in good company. It's one of the most common reasons people sell. History just hasn't rewarded it. Returns after the market reaches an all-time high have been been comparable to, or even better than, investing on any other random day. Since 1926, the S&P 500 was higher one year after a new market high 81% of the time, with an average annualized return of almost 14% Historically, new all-time highs typically lead to new all-time highs. That doesn't mean the ride is smooth. Even in positive years, the market typically falls about 14% at some point, yet annual returns have still been positive in roughly 3 out of 4 years. As Morgan Housel said: "The market has declined at least 10% on average every 11 months for the last 100 years.
So if you go on TV and predict a 10% decline, you should really just say 'everything is normal."
Bull markets have never moved in a straight line up and to the right, and there's little reason to expect this one will be the exception. What This Means If You're Retired (Or Close To It)For retirees, the pull to sell in a bull market can be even stronger. You're no longer adding to your accounts, so a large gain can feel less like an opportunity and more like something to protect before it slips away. "We've already won... why risk giving it back?" The catch is that a 30+ year retirement still needs decades of growth to stay ahead of inflation. Trimming stocks every time the market looks "toppy" carries its own risk: Running short later because you got too conservative too early. This is exactly what a war chest is for. When you keep 2-3 years of known spending in cash and high-quality bonds, you're not forced to sell stocks at a bad moment to fund your lifestyle. You can tune out the scary headline of the week and let the volatile part of your portfolio do its job because your next few years of income don't depend on it. Discipline comes from building a plan that helps you stay invested without having to rely on willpower through every market dip. Bottom LineSelling is easy to justify when the market is falling, and it's just as easy to justify when it's rising. There's always a reason to take something off the table, and always a headline to make that reason feel smart. But the investors who build lasting wealth tend to be the ones who find a way to stay invested through more uncertainty than feels comfortable. 📚 What I've Been Reading
Thank you for reading! Please reply to this email with comments, questions, and/or feedback. Stay wealthy, Taylor Schulte, CFP® |