In mid-August, large (S&P 500), mid (S&P 400), and small-cap (Russell 2000) US benchmarks, as well as growth and value, set all-time highs. It’s been said that all new highs are positive, except for the final one. 

Since 1995, whenever all three indexes hit new highs within the same week, the S&P 500 has usually posted above-average gains over the next 30, 60, and 90 days. In fact, the S&P 500 has risen 85% of the time in the 90 days after these simultaneous highs. 

How can this happen when there are so many concerns? Bond yields are rising because people worry about large federal deficits and government debt. Some doubt whether the Fed can control inflation. Others think the AI boom might be overhyped and too reliant on debt. Japan might need to sell US Treasury holdings to prop up their currency, which would lead to higher interest rates. Prediction markets now suggest a Democratic House majority, which could bring more gridlock. While markets often handle gridlock well, deep political divisions could still cause trouble. 

What should you do with all this conflicting information? We can try to guess how each issue will play out, but then we also must figure out how the market will respond. Even if you predict the future, the market might react differently than you expect. Getting both right is tough. 

I prefer to watch what investors as a whole are doing. Every trading day, people buy or sell based on how they feel about the latest news. 

Rather than trying to predict the future, it’s easier to see which way the market is moving. 

The market being near record highs tells us something, but not everything. It’s important to look at other signs to see if these highs are strong or shaky. For example, are more stocks near their 52-week highs compared to the last time we hit a record? Is the number of stocks down 20% or more from their highs shrinking or growing larger? Looking at these details helps us decide whether to stay aggressive or start questioning if the gains will last. 

The good news is that the smallest stocks have been doing better than the rest since April 2025. These stocks are harder to buy and sell (less liquid) than most. Small caps are also more sensitive to higher interest rates. Investing in them shows investors are confident about the economy. Money is moving out of the biggest companies to take on more risk. What’s interesting is that this is happening while the market is at record highs, not after a big drop when investors are bottom fishing in the most beaten-up stocks. 

As I’ve mentioned, even though I’m optimistic, we shouldn’t expect everything to go perfectly. There’s always something to worry about. Sometimes these concerns fade away, and sometimes they become bigger problems. There could be a market correction before the year ends, but unless the facts change, I recommend staying the course.