Stock market all-time highs are not always dangerous. But they are not all created equal.<\/p>\n
We recently took a look at S&P 500 record highs and found that historically, they performed a lot like non-record days. The Nasdaq Composite (^IXIC) and Russell 2000 (^RUT) tell a more complicated story.<\/p>\n
Outside of the broad large-cap benchmark, record highs have historically been less reliable entry points.<\/p>\n
Since 1971, the Nasdaq\u2019s median one-year gain after an all-time high was about 14%, slightly below its gain after non-record days. The gap widened over time. Five years after Nasdaq record highs, the median gain is about 60%, compared with 81% after non-record days.<\/p>\n Far from a disaster, Nasdaq highs have still produced strong long-term returns. But they don\u2019t behave like S&P 500 (^GSPC) highs, where record closes tend to do as well as ordinary entry points.<\/p>\n The ride is also rougher in the Nasdaq.<\/p>\n In the year after Nasdaq record highs, the index\u2019s typical worst drop from the entry point is about 10%, compared with about 8% after non-record days. And the chances of a 10% drop were higher too: roughly half after record highs versus about 42% after non-record days.<\/p>\n The Russell 2000 shows the same problem from a small-cap angle.<\/p>\n Since 1979, the small-cap index\u2019s median one-year gain after record highs was 6%, compared with 11% after non-record days. After five years, the gap was wider: 34% after highs versus 51% after non-record days.<\/p>\n The win-rate data tells the same story.<\/p>\n The Russell was higher one year after record highs 64% of the time, compared with 71% after non-record days. Two years out, the gap widened to 67% versus 81%.<\/p>\n Exactly why these differences even exist among indexes likely comes down to market structure.<\/p>\n The S&P 500 is anchored by the biggest and most profitable US companies. It tends to be more stable and less volatile than the Nasdaq, which is more growth-heavy. Meanwhile, the Russell 2000 is smaller, more cyclical, and has traded with more volatility.<\/p>\n That is where dollar-cost averaging \u2014 investing set amounts over time instead of all at once \u2014 can help.<\/p>\n If record highs are less reliable in a market, spreading out the entry can be more useful than trying to nail the perfect high \u2014 or dip.<\/p>\n Jared Blikre is the global markets and data editor for Yahoo Finance. Follow him on X at @SPYJared or email him at <\/em>jaredblikre@yahooinc.com<\/em>.<\/em><\/p>\n![\"Nasdaq](\"https:\/\/s.yimg.com\/ny\/api\/res\/1.2\/VcbybBj02MSb1jBkBXul2g--\/YXBwaWQ9aGlnaGxhbmRlcjt3PTk2MDtoPTYxNw--\/https:\/\/d29szjachogqwa.cloudfront.net\/images\/user-uploaded\/nas-ret_9641.png\")
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