The year-over-year inflation rate from April 2025 to April 2026 sits at 3.8%, a figure that has made financial life difficult for many Americans.
Yet that number looks modest when measured against the 23.7% inflation rate that struck the United States between June 1919 and June 1920.
Historical perspective can be a powerful tool for investors trying to decide whether to enter a market trading at elevated levels.
Many investors face what analysts describe as a “psychological barrier to entry” when considering putting money to work at all-time highs.
The instinct to seek bargains is deeply conditioned, and buying at record prices can feel like a guaranteed path to losses.
However, data stretching back decades tells a very different story about the risks of investing during hot markets.
Since 1950, the broad U.S. equity market has set more than 1,300 all-time highs, making record prices a far more routine occurrence than many investors realise.
Investors who abandoned the market every time prices peaked would have missed out on substantial gains accumulated across those many record-setting periods.
Bloomberg data comparing returns between 1950 and 1925 shows investors who bought only at all-time highs achieved an average one-year return of 11.3%, versus 12.8% for those who invested continuously.
Over a three-year horizon, buying only at highs returned an average of 10.8%, compared to 11.5% for investors who stayed the course through both highs and lows.
At the five-year mark, the gap narrowed further, with all-time-high buyers averaging 10.5% against 11.4% for continuous investors, according to Bloomberg data.
These figures do not account for transaction costs, management fees, or taxes, but they illustrate how little market highs have historically damaged investor portfolios.
Many investors respond to elevated markets by waiting for a correction of more than 10% before committing fresh capital to stocks.
Looking at all market highs since 1950, a correction exceeding 10% within one year has occurred only 9% of the time.
The S&P 500 has never been down by more than 10% at the five-year mark following an all-time high since 1950, a striking piece of long-run data.
Investors who chose to sit out and wait for prices to cool have typically found that strategy costly rather than cautious.
Timing the market by attempting to avoid highs and buy only at lows has historically proven nearly impossible to execute successfully over time.
While past results do not predict future performance, the historical record offers a consistent and reassuring picture for investors willing to act despite elevated prices.
