By: Ben Carlson
Things are pretty good for investors at the moment. The S&P 500 continues to hit new high after new high in 2019. The gains this year have more than made up for the nearly 20% loss near the end of last year. While U.S. markets have outperformed handily on a relative basis during this cycle, foreign stocks have officially joined the party, with the MSCI All-Country World Index breaking out to new highs this year as well.
New highs are great for those holding stocks in their portfolio but there is a downside when stocks seemingly do nothing but rise. Anyone who’s been holding cash waiting for lower prices and a better entry point or those with new savings to deploy into the markets have had to do so at higher and higher prices. Rising prices are a catch-22 in that they’re a welcome sign for current returns but almost certainly detract from expected returns, given that dividend yields and valuations tend to rise when markets move higher.