Buying Stocks at Record Highs: What Our Experts Think

Buying stocks when markets are at all-time highs can be a confusing proposition.

On the one hand, doing so goes against the most basic of investing tips, “Buy Low, Sell High.” And with the S&P 500 trading at its highest price-to-earnings ratio (24.69) since the recession, there aren’t a whole lot of bargain stocks out there, at least not by traditional value investing measures. Further complicating matters is the ongoing second-quarter earnings season, which has been a mixed bag so far.

On the other hand, buying stocks when momentum—and charts—are on your side is typically a profitable proposition. As we like to say at Cabot, trends always last longer than most people expect. And right now, the trend in the stock market is definitively up.

So, what’s an individual investor like yourself to do? Here are a few words of wisdom our investing experts have been sharing with their subscribers of late.

Paul Goodwin, Chief Analyst, Cabot Global Stocks Explorer

Pay especially close attention to the action of your individual stocks. If they’re just pausing in parallel with the Nasdaq and haven’t leached away your profit (or handed you a loss), you can probably hold on without excessive risk.

Yes, you should watch for technical tipoffs like dips through support or heading lower on unusually high trading volume. But until the market declares itself by dropping the major indexes below their 50-day lines (it’s possible that Dow 22,000 is short-lived), a little patience will probably serve you just fine.

chart up blue arrow and line

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Mike Cintolo, Chief Analyst, Cabot Growth Investor and Cabot Top Ten Trader

From a top-down perspective, the market is still in good shape, with all three of our key market timing indicators pointed up. That’s reason enough to stay heavily invested, which is why we have eight of a possible 10 slots filled in the Model Portfolio.

That said, before we put more cash to work, we’d like to see more strength among growth stocks; their action is good, but not great, as many of them have stalled near their old highs, and those that have hit virgin turf haven’t made a ton of progress. We’ll be watching to see if that changes going forward.

Tim Lutts, President of Cabot Wealth Network and Chief Analyst of Cabot Stock of the Week

July saw the market make great strides to the upside, erasing the troubling signs of June. And what will August bring? Surprises, I’m sure—and almost certainly further gains by leading stocks.

Crista Huff, Chief Analyst, Cabot Undervalued Stocks Advisor

Investors often ask me whether I foresee a stock market correction or crash looming in the coming months.

Historically, the S&P 500 index rises 20% or more, two to four times each decade. You can get a good visual of the performance history on this bar chart published by Macrotrends. Notice that during the current decade, we’ve only experienced one 20%+ year in the S&P 500. That was in 2013. That’s great news, which tells you that we are far more overdue for a big year in the stock market than we are overdue for a down year.

Conclusion: You Should Be Buying Stocks

While our four experts acknowledge that the market has entered some tenuous territory, every single one of them still recommends buying stocks.

The bull market remains in full effect, and when viewed on a 15- to 20-year chart, doesn’t actually look that overdone. Despite the big run-up since November and valuations at eight-year highs, there isn’t enough evidence to preemptively start selling stocks in anticipation of a market crash that may or may not happen.

Of course, you should watch whatever stocks you do buy closely. But when isn’t that the case?

If you’d like some help deciding which stocks to buy with markets at all-time highs, you can subscribe to any one of our 12 investment advisories by clicking here.

In the meantime, don’t run from this bull market. Embrace it—at least until we tell you otherwise!

Chris Preston

Financial News, Stock Tips, and Investing How-Tos

Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.

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