Last week, I received several calls asking whether we should raise cash, given that the market is at all-time highs and there is no shortage of things to worry about. In my experience, when a few clients are asking the same question, many others are likely thinking it as well. 

The frequency of my recent notes reflects the level of concern I sense among clients. I hope they provide some perspective and reassurance. 

Uncertainty is an unavoidable part of investing, but reacting to fear often does more harm than good. As I’ve noted before, my recommendation during three of the last four market downturns was simply to ride them out. Fortunately, that ended up being the correct reaction. 

What I’ve learned from this is that it is better to wait until we can see the whites of the bear’s (market) eyes than to worry about how long he has been in his cave. 

The stock market has continued to make impressive progress, with many major and smaller market indexes reaching new all-time highs. At first glance, that might suggest the difficult periods are behind us and that the path forward should be relatively smooth. The picture beneath the surface, however, is somewhat more complicated. 

The overall weight of the evidence remains favorable, and I continue to believe that the path of least resistance for stocks is higher. At the same time, some measures of market participation have not kept pace with the major indexes as they typically do during the strongest phases of a bull market. That suggests investors should be prepared for a continued push-and-pull environment, with periods of volatility and changing market leadership even if the longer-term trend remains positive. 

Despite this, the outlook beyond the next several months has become more encouraging. One recent forecast from a market service I rely on raised its 12-month target for the S&P 500 to 8,650. That would represent approximately 12% additional appreciation from current levels. The same outlook projects the S&P 500 finishing 2026 near 8,050, or roughly 4% above current levels. 

Of course, market targets are estimates rather than guarantees. What is more important is the reasoning behind the improved outlook. 

Corporate fundamentals remain supportive. Earnings expectations across a broad range of companies continue to provide a favorable backdrop, rather than the market's advance depending solely on a handful of stocks. 

The economic environment also remains supportive. The labor market continues to provide jobs and wage growth, which helps sustain consumer spending. Higher household wealth resulting from several years of strong market returns may provide an additional boost to spending. Meanwhile, although oil prices remain elevated, expectations that energy prices could moderate as geopolitical tensions ease would help reduce some of the pressure on inflation. 

History provides another reason for cautious optimism. Certain periods surrounding midterm elections and the presidential election cycle have historically been favorable for stocks. History never guarantees what will happen next, but these patterns add another positive factor to an already constructive outlook. 

None of this means the market will move straight higher. After nearly four years of gains and with many indexes at record levels, periodic pullbacks would be normal and should be expected. Some parts of the market will likely perform better than others, and leadership may continue to rotate among sectors, industries, and investment styles. 

Overall, the message is still positive. The evidence shows this bull market could keep going, thanks to strong company earnings, a solid economy, ongoing investment in artificial intelligence, more stocks joining in, and helpful historical trends.