Investors shouldn't fear entering the stock market at record highs as past performance indicates more upside is ahead, UBS Wealth Management chief says

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© Getty Images Investors shouldn’t fear entering the stock market at record highs as past performance indicates more upside is ahead, UBS Wealth Management chief says

  • UBS’s Mark Haefele says “investors should not fear entering the market at all-time highs.”
  • Haefele noted stocks rose an average of 11.7% in the 12 months following records since 1960.
  • The CIO of UBS Global Wealth Management said clients should look for exposure to financials, energy, and industrials.

Investors shouldn’t fear entering the stock market at record highs because past performance has shown more upside usually follows, according to Mark Haefele, UBS Global Wealth Management’s chief investment officer.

In a note to clients on Monday, Haefele said that stocks’ record highs aren’t “barriers to further gains” based on historic market data.

“Based on data going back to 1960, stocks have performed slightly better than average after hitting all-time highs,” the CIO said.

According to UBS’s data, in the past sixty years stocks rose an average of 11.7% in the 12 months following record highs.

The S&P 500 hit new all-time highs on Monday of roughly $4080 and has now rallied approximately 80% from last March’s lows.

Haefele highlighted the fact that attempting to time market entries to avoid buying high and selling low has shown “little benefit” to past market participants in his note to clients.

“An investor putting USD 1 of their monthly paycheck into the S&P 500 since 1945 would have grown their portfolio to USD 253,645 if they put the cash to work straight away each month. That investor would have secured USD 261,699 (or a paltry 0.03% more per year) if they had timed the market perfectly by only investing at levels the market never subsequently dropped below,” Haefele wrote.

The UBS Global Wealth Management CIO also touched on historic returns seen during periods of rising nominal yields.

According to Haefele, “in the past 25 years, there have been 10 periods in which the US 10- year bond yield has risen by more than 100bps. And in all instances, global equities delivered flat or positive returns.”

UBS recommended investors continue to put funds into the “reflation trade” after data released last Friday showed nonfarm payrolls surged by 916,000 in March, the biggest gain since last August.

“We believe the rotation out of growth stocks and into cyclical areas of the market has further to run,” the team wrote.

UBS and Haefele said the financial, industrial, and energy sectors are set to outperform as the US economy continues to reopen.

Small and mid cap stocks are likely to benefit more than large and mega-cap stocks from a “vaccine-led reopening” over the coming months as well, according to the firm.