What's Inside:

• All-time highs aren't a sell signal—historically, they produce better-than-average returns
• Current 22x valuations are high but justified by stronger profit margins than the 1990s
• 90 days without a 2% pullback sounds long, but pales compared to last year's 350-day streak

As markets hover near all-time highs and we take on the month of September, which has a strong history of volatility, many investors are feeling uneasy. Should you be worried? According to Range’s VP of Investments, Taresh Batra, the answer might surprise you.

The S&P 500 is constantly reaching all-time highs. Volatility seems down. The market hasn't had a 2% or more sell-off in over 90 sessions. September is historically a down month. Are you concerned about any of this?

90 days sounds like a long streak, but it's really not that remarkable compared to history. In 2024, we broke a streak of over 350 consecutive days without a 2% down day. So we've had much longer streaks in the past. We're certainly not in excessive or extreme territory on that front.

It's true that volatility is lower and the market is at all-time highs. Counterintuitively, those are actually positive market signals: When the volatility index (VIX) declines for four consecutive months, markets have been higher three months later 80% of the time, and higher 100% of the time nine months later.

Investing at all-time highs can feel scary, but the data shows that your average one-year, three-year, and five-year returns are actually better than average when investing at all-time highs.

We also have short memories. It may seem like the market is going up every day but we’ve had three bear markets over the past five years! Since 1945, we’ve normally seen one bear market every five years. So we’ve certainly had our fair share of volatility recently.

We just had a massive revision to jobs numbers and inflation data seems to be stagnant. Why are investors not concerned about these data points?

The big jobs revision is for the period ending in March 2025, which feels like ancient history in market terms. Because the labor data has been so volatile and subject to such large revisions, many investors are also starting to discount it, believing it's not a reliable indicator of where the economy is going. A large negative revision was also widely expected, so whether the jobs number was revised down 800,000 or 900,000, I’m not sure matters much to investors.

Last month’s jobs number of 22,000 was weak but, historically, August data typically gets revised higher. Job growth was still positive overall, so it’s possible the labor market may have already bottomed earlier this year.

With inflation, headline numbers seem to not be improving but under the hood there are encouraging trends. Supercore CPI, which excludes energy, food and housing actually decelerated last month. PPI (the producers price index), which is a leading indicator of consumer-inflation unexpectedly showed signs of deflation last month.

This is all in spite of tariff-related headwinds that many expected to send inflation spiraling. So there’s an element of “no incremental bad news” with respect to recent data, clearing the path for rate cuts while the economy is still expanding.

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The S&P 500 is at 22x forward earnings, which is the highest since the dotcom bubble, except for a brief period in 2020. How do current valuations compare to the dotcom bubble?

The valuation of the S&P 500 hasn't really moved all year. We started the year around 22x. We're currently around 22x. So the market performance year-to-date has been driven by earnings growth and not necessarily valuation expansion, which is what we expected to happen at the beginning of the year.

I think the comparison to the dotcom era is very interesting, and it's something that's being talked about more and more in the media. It's important to understand the similarities, but also the differences between now and then. 

Valuation ultimately is a reflection of the quality of the asset that you actually own. If it increases in quality, you would tend to pay a higher price for it. The S&P 500 today is a much better asset than it was in the 1990s or the 2000s. Profit margins of companies in the S&P 500 are significantly higher, balance sheets are significantly better, and growth is still very, very strong.

When you look at valuations, they're high, but they're not nearly as high as they were back in the dotcom bubble, especially within tech. Large-cap tech is trading at around 28x earnings. In the 1990s, leading up to the 2000 dotcom crisis, valuations had extended to more than two times that level.

If you’re not concerned about economic indicators and valuations, what are you focused on?

What we're focused on is the underlying fundamentals of businesses and the economy. Macro data points that come out—they're almost always backward-looking. As an equity investor, the thing that I've focused the most on in my career is what companies are actually telling us, what they're expecting for future profit growth.

Earnings trends and earnings revisions have been moving higher. So expectations for future earnings growth have been moving in the right direction. A lot of this has been driven by strong secular themes like AI-driven capital expenditures and productivity improvements.

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Are we just temporarily propped up by AI investment, especially carried by the top tech firms?

That's a really good question. The more we can have broader participation in the market, the healthier the market is. Concentration is a risk. Over the last few years, we have been carried by really strong AI fundamentals, really high-quality tech companies that are able to withstand macroeconomic headwinds, which has been positive for those of us who own the broad index, because it has a lot of exposure to these companies.

But we want breadth to expand. We want the rest of the index, the rest of the investable universe, to also participate in these rallies. We've seen in recent months some evidence of breadth starting to expand—smaller and mid-cap companies starting to participate in stock price momentum, valuations expanding there a bit, and earnings revisions starting to move higher for these businesses as well. When breadth expands, the market becomes less vulnerable to the performance of a handful of companies or a single sector, and the duration of this rally becomes more sustainable.

What should high earners do with their portfolios right now?

I think there's a lot of focus on near-term seasonality, near-term positioning, and valuations. I think investors have to zoom out a bit and look over the next 12 months. We're entering a period where we have fiscal tailwinds with the tax bill providing some stimulus. We have deregulation, which is already underway in the banking sector; a weaker dollar, which supports US multinational companies; and stable inflation in spite of expected tariff pressures. Meanwhile, AI-driven capex investment and productivity growth are supporting corporate earnings, all while we're likely to get more monetary easing.

Outside the U.S., you have valuations that are lower and earnings expectations that have stabilized. There is also a clear path to lower rates because you don't have to deal with tariff-related uncertainty.

In fixed income, you have yields that remain high relative to average levels over the past decade, especially at the front end. This gives investors the opportunity to earn attractive returns from high-quality borrowers without taking a lot of duration risk.

So, putting all this together, we believe this is an environment that encourages staying invested, staying diversified, and remaining focused on the long term. We still view any market weakness as an opportunity to deploy capital strategically according to your investment plan.

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FAQs

Q: Is it bad to invest when the S&P 500 is at all-time highs?

A: No, investing at all-time highs isn't necessarily bad. Historical data shows that average one-year, three-year, and five-year returns are actually better than average when investing at all-time highs. Markets tend to trend upward over time, and waiting for a pullback often means missing out on gains. As Taresh Batra notes, the S&P 500 has hit numerous all-time highs throughout history, yet long-term investors who stayed invested have been rewarded. The key is maintaining a diversified portfolio aligned with your long-term financial goals rather than trying to time the market based on price levels alone.

Q: How do I protect my portfolio if valuations are as high as the dotcom bubble?

A: While today's S&P 500 trades at 22x forward earnings, the comparison to the dotcom bubble isn't apples-to-apples. Current valuations reflect fundamentally stronger companies—today's S&P 500 companies have higher profit margins, better balance sheets, and more sustainable growth than in the 1990s. Large-cap tech trades at 28x earnings today versus over 56x during the dotcom peak. To protect your portfolio, focus on diversification across asset classes, implement tax-loss harvesting even in up markets, and maintain appropriate asset allocation based on your risk tolerance. Range's automated tax-loss harvesting and strategic asset placement across different account types can help preserve after-tax returns regardless of market conditions.

Q: Should high earners make any portfolio changes when markets haven't pulled back in 90+ days?

A: A 90-day streak without a 2% pullback isn't historically extreme—we saw a 350-day streak end just last year. Rather than making reactive changes based on this metric, high earners should focus on tax-efficient portfolio management and long-term positioning. This includes maximizing tax-advantaged accounts, implementing systematic tax-loss harvesting, and ensuring proper asset location (placing the right investments in the right account types). With fiscal tailwinds, stable inflation, and continued AI-driven growth ahead, staying invested and diversified while managing for tax efficiency is typically more beneficial than attempting to time short-term market movements. Consider using Range's investment fee calculator to ensure you're not paying unnecessary fees that drag down returns.

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This communication contains forward-looking statements that reflect Range Advisory, LLC’s (“Range”) current views, expectations, beliefs and/or projections about future events or results. Forward-looking statements involve risks and uncertainties — including, without limitation, market conditions, regulatory changes, economic conditions — any of which could cause actual results to differ materially from those expressed or implied by such statements. Range undertakes no obligation to update or revise any forward-looking statements to reflect new information, future events or otherwise, except as required by law. Recipients should not place undue reliance on forward-looking statements, which are presented for informational purposes only and do not constitute investment advice or a recommendation to buy, hold, or sell any security. Past performance is not indicative of future results. The views, opinions and analyses expressed by Range in this material are those of Range as of the date shown, and are provided for informational purposes only.