When the Stock Market Feels Too High

By: Jack Strulowitz

The headlines keep repeating the same phrase: all-time high. The stock market is up again, portfolio values are higher than ever, and investors are left with a mixture of excitement and unease. For some, it feels like free money. For others, it feels like standing on a tall ladder that gets shakier with each step.

If you have that gnawing feeling that it can’t go on forever, you’re not alone. The question is what to do about it.

Markets set new records all the time. By definition, in a healthy economy, the long-term trend points upward. That means new highs are not unusual; they are normal. The problem is that investors do not always feel normal at those highs.

When stocks are cheap, fear prevents people from buying. When stocks are expensive, either greed or fear of missing out pulls them in. That cycle repeats over and over.

The first step in responding wisely is to acknowledge the emotional pull of markets at highs. They tempt us to either pile in recklessly or retreat to cash in fear. Neither extreme is the right move most of the time.

It’s natural to wonder if you should sell everything and wait for the next crash. The problem is that no one knows consistently when that crash will come.

Markets can stay expensive for far longer than anyone expects. Selling early means you miss years of additional gains. On the other hand, staying in without a plan to get out can leave you vulnerable if the downturn comes tomorrow.

Here is where it’s worth ignoring the noise of financial media. For every “expert” who sees the next bull run, another is predicting an imminent collapse. For every buyer of a stock, there is a seller convinced the price is too high. You can find someone to confirm any bias you want. Letting headlines drive your decisions is a recipe for confusion, not clarity.

The solution is not about timing the top perfectly. It’s about building a strategy that works whether stocks rise or fall in value.

Revisit Your Allocation.

Instead of asking “Is the stock market too high?” ask, “Does my portfolio still match my goals and risk tolerance?” If stocks have surged, they may now represent a much larger share of your portfolio than you intended. That could mean rebalancing: selling some winners and putting money back into bonds, cash reserves, or alternative assets to restore balance.

Focus on Cash Flow, Not Just Prices.

If you are in or near retirement, the question is less about whether the S&P is at 5,000 or 7,000 and more about whether your portfolio can generate the income you need. Dividend payments, bond interest, and systematic withdrawal strategies matter more than the day-to-day price of the index.

Build a Cushion.

Stocks fall, sometimes sharply. Having 6 to 12 months of living expenses in safe, liquid assets gives you the flexibility to ride out downturns without panic-selling investments at the worst time.

Keep Investing Consistently.

For those still saving, the discipline of adding money regularly is more powerful than guessing when the next drop will come. This approach, called dollar-cost averaging, means you invest the same amount on a set schedule, buying more shares when prices are low and fewer when they are high. Over time, it smooths out the ups and downs and helps remove emotion from the process.

Consider Taxes Before Acting.

Selling investments just because prices are high can trigger large capital-gains taxes. Sometimes it is better to rebalance gradually, harvest losses elsewhere, or use charitable strategies to offset taxes.

It helps to remember: the stock market is supposed to hit highs. That is what compounding wealth looks like over decades. Every generation looks back and sees that what felt “expensive” at the time turned out to be cheap compared to the future. Years from now, today’s index levels and stock prices will likely look the same way. What feels lofty in the moment will one day seem like a bargain in hindsight.

There is also a lesson in humility. Valuations do matter. Overpaying for assets today can lead to weaker returns tomorrow. The discipline is to accept both truths at once: stocks rise in the long run, but they fluctuate, sometimes violently, in the short run.

There is also a parallel between financial planning and life planning. At times of abundance, it is easy to lose discipline. We spend more freely, take on more obligations, or assume the good times will last forever. The real test is not how we behave when things are hard, but how we behave when things feel flush.

Stocks at all-time highs offer the same challenge. They invite complacency. The wiser path is to use this moment of strength to get your house in order, to rebalance, to check your goals, to make sure your plan is sturdy enough for the inevitable storms.

All-time highs are not a warning siren by themselves. They are milestones on a long upward path. The mistake is in assuming they will last forever. Ignore the pundits arguing over whose right: the bull or the bear. For every stock bought, there is a seller on the other side. What matters is not predicting who wins the debate, but making sure your plan is strong enough to handle both outcomes.

If you use this time to review your allocation, secure your cash flow, and recommit to a disciplined plan, you will not need to predict the next downturn. You will be ready for it. And readiness, not prediction, is what builds lasting wealth. n

Jack Strulowitz is a Financial Advisor at Bernath & Rosenberg in Cedarhurst, NY, where he helps high–net worth individuals and families manage their investments and build comprehensive strategies for retirement, tax, and estate planning. For questions or to schedule a consultation, please email him at: [email protected] or call 847-962-3352.

This material is for general information and educational purposes only and is not intended to provide specific advice or recommendations for any individual. Investing involves risk including the loss of principal. Asset allocation does not ensure a profit or protect against a loss. Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss. Securities and advisory services offered through LPL Financial, a registered investment advisor, member FINRA/SIPC.