ArcaMax

Earlier this month, U.S. stock market indexes reached new highs. This may surprise you considering the ongoing uncertainty about the Middle East war; prices rising faster than the Fed wants; and U.S. government bond yields jumping.

Any one of those headlines alone might have been enough to spook investors, yet stocks kept climbing regardless. The situation prompted many of you to ask why this was occurring and whether or not a crash was imminent.

My simple view on what is driving stocks boils down to two facts: Consumers are spending and corporate America is investing massive dollars in AI. That combination has helped keep corporate earnings strong, and in turn, pushed up the stock market. As to whether or not we are witnessing a bubble, the answer is more complicated.

Whenever there is a technological breakthrough like AI, or the internet and telecom boom of the 1990s, there is massive speculation. And there is no doubt that there will be winners and losers this go-round, and probably a stock market correction or bear market along the way, but there is no need to try to guess when that might happen. In fact, I encourage you to tune out the prognosticators who foresee the next mother of all crashes.

Every bull market produces what some call “perma-bears” — market watchers, money managers, salespeople who want you to buy their “trading system” — who see doom in every rally and eventually get to say “I told you so” when a downturn finally arrives. Some of these folks may have even pinpointed previous downturns and made a lot of money in the process.

The trouble with perma-bears isn't that they're always wrong. It's that they're rarely useful. A prediction with no firm timeframe, no clear catalyst, and no acknowledgment of the cost of being wrong along the way isn't really actionable advice — it's entertainment.

If you move to cash every time one of them sounds the alarm, you may miss the continued market gains. And even if you avoid the losses if a crash were to occur, how would you know when to get back in? That’s the hard part of timing the market: You need to execute two sides — the selling and then the buying back — in order to make it work.

According to research from JP Morgan Chase, missing out on the S&P 500’s best days over the past 20 years significantly reduces overall return – and even meant large losses, versus staying fully invested. So, if you are clever and get out of the market, know that seven of the best 10 days for the S&P 500 occurred within 15 days of the 10 worst days. That’s what the saying goes, “It’s about time in the market, not timing the market.”

So, when you see someone on TV or social media warning about the "crash to come," remind yourself that there is ample evidence that trying to time the market just does not work. Try to tune out the noise, stick to your game plan, and periodically rebalance your diversified portfolio.

But if you need your money within the next 12 months, perhaps to make a house down payment, purchase a car or pay a tuition bill, make sure that it is not invested in anything that can fluctuate (stocks, bonds, crypto) and instead keep it in a safe savings, checking or money market.

Sooner or later, one of the perma-bears will be right, but your financial plan, built for your circumstances and revisited on a regular schedule, will serve you far better than any single prediction, no matter how confidently — or how loudly — it's delivered, or how often it's repeated.

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(Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com)

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