Buy High, Sell Higher - November 20, 2019

Buy high and sell higher—I know, it sounds counterintuitive. Let me explain.

  • Through the three years ended November 18, the S&P 500 Index2 has registered 112 new highs, including 23 this year.
  • 53 closing highs were recorded in 2014, 10 in 2015, and 18 in 2016 (Reformed Broker, St. Louis Federal Reserve, Dow Jones Indices).
  • On November 18, the S&P 500 Index recorded its 23rd closing high of the year—3,122.03 (St. Louis Federal Reserve).

What’s behind the upbeat mood? Fading recession fears and optimism the U.S. and China will soon sign phase one of a trade deal.

  • If a deal isn’t signed, expect short-term volatility.
  • New tariffs scheduled to go into effect on December 15 could be implemented, exacerbating tensions and leading to a new round of tit-for-tat retaliation.

Investor’s corner

Investors may feel jubilation and apprehension when stocks trade at new highs.

Jubilation because a well-diversified portfolio is rising in value. Apprehension because a downturn might occur, or it’s too late to buy. Others may become overconfident, wanting to take on too much risk.

A new high simply means that today’s close was higher than yesterday’s close—nothing else. In a bull market, we’d expect a series of new highs.

A well-designed financial plan crafted around your specific needs prevents one’s emotions from overruling one’s intellect. It removes the emotional component and keeps you on the path toward your financial goals.