With the S&P 500 at an All-Time High to Start 2026, Is It Smart to Buy Stocks?

• Since recovering from the 2022 bear market, the S&P 500 closed at record highs 95 times through the end of 2025, demonstrating that all-time highs often lead to further gains rather than corrections
• BlackRock research found that while one-year returns at all-time highs average 7.6% versus 8.8% on other days, three- and five-year returns are higher when investing at record levels, undermining market timing strategies
• The S&P 500 forward P/E ratio currently sits around 22, a historically elevated level reached only a few times, though long-term stock returns still substantially outpace Treasury yields and cash holdings

Market Summary: S&P 500 at All-Time Highs Entering 2026

Key Market Performance

The S&P 500 reached 6,970.83 at the start of 2026, marking yet another all-time high following three consecutive years of exceptional returns. The index delivered total returns of 26% (2023), 25% (2024), and 18% (2025). Other major indices also traded positively, with the Dow Jones at 49,488.20 (+0.5%) and NASDAQ at 23,697.95 (+0.9%).

Historical Context and Analysis

Despite elevated valuations and investor concerns about potential market exhaustion, historical data suggests buying at all-time highs remains a sound strategy. Since recovering from the 2022 bear market, the S&P 500 closed at record highs 96 times through end-2025. BlackRock analysis reveals that while average one-year returns at all-time highs (7.6%) slightly trail other trading days (8.8%), three- and five-year returns are actually higher, undermining market-timing strategies.

Valuation Concerns

The S&P 500's forward P/E ratio currently sits around 22, a level reached only a few times historically, raising questions about stretched valuations. Concerns include potential AI bubble formation, slowing job growth, and elevated stock prices that may signal increased crash risk.

Investment Implications

Analysts recommend investors maintain long-term focus rather than attempting to time the market. Options include building diversified portfolios of quality individual stocks or utilizing low-cost index funds like the Vanguard S&P 500 ETF (VOO) for broad market exposure. The key message: "Time in the market is more valuable than timing the market," particularly given stocks' superior long-term returns versus cash or Treasury alternatives.