U.S. equities set all-time highs 1 out of every 3 days this quarter

What the strong momentum means for advisors and their clients

It’s often said that bull markets climb a wall of worry, and 2025 has certainly embodied this adage. Despite negative headlines and warning signs, risk assets maintained their upward trajectory during the third quarter. Both U.S. and international equities delivered strong returns of 8% and 7%, respectively, as of September 24, 2025.

Equities were not the only asset class that benefited investors during the quarter; broad fixed income categories also posted positive returns, as shown in Figure 1. From a portfolio perspective, a balanced 60/40 stock/bond portfolio returned 5% for the quarter and is now up 13% year-to-date (as of September 24, 2025), materially above long-term average returns.

New all-time highs create wealth and, for some, worry

In the third quarter, U.S. equity markets reached 23 new all-time highs, which equates to more than one out of every three trading days. For historical context, since 1950, the average number of new all-time highs per quarter has been about five, or roughly one out of thirteen trading days. The number of all-time highs hit this quarter ranks 8th out of 303 quarters observed since 1950, placing it in the top 5% of all quarters historically.

Zooming out to a year-to-date basis (YTD), U.S. equities have hit new all-time highs on 28 days or 15% of trading days so far. This exceeds, by a large margin, the long-term average of approximately 15 all-time high days, or 8% of trading days, through the first nine months of a typical year. While the frequency and consistency of hitting all-time highs over the past few years has been primarily confined to broad U.S. equity markets, largely driven by mega-cap growth stocks, we are now seeing this trend spread to other risk assets and equity indexes. As a result, a greater number of sub-asset classes are hitting all-time highs.

However, while markets trend up over time and new all-time highs are not an uncommon occurrence—but still atypical at under 10% of all trading days—they can be a source of anxiety and worry for some clients. To help advisors manage these behavioral tendencies, we developed our 3B mental model as a means of educating clients. It explains that business models and human biology are prone to focus on risk and what could go wrong.

In today’s context, with the market near all-time highs and valuations at the high end of historical ranges, it’s natural to worry that the future path for equities is down from here. However, history tells a more nuanced story.

Figure 2 illustrates the average forward returns for U.S. stocks over increasing time horizons, depending on whether the market was or was not at an all-time high at the beginning of the period. What may surprise many investors is that, historically, stocks have performed slightly better on a forward 1-, 3-, and 5-year basis when starting from an all-time high compared to when they were not.

While it's tempting to get excited about this, given we are currently at all-time highs, the outperformance has been marginal, and it's crucial to remember there is significant variance within average returns. For example, Figure 3 shows that, regardless of whether markets are trading at all-time highs or not, the equity market has experienced a negative annual return 26% of the time with max drawdowns of more than 40%. 

The variability in Figure 3 underscores the fact that investing at all-time highs, while showing slightly higher average returns compared with other entry points, does not guarantee success. There are numerous factors and inputs that influence the market's future direction and relying on just one or a few metrics often leads to disappointment.

Another critical factor to consider, as shown in Figures 2 and 3, is that, while the market tends to outperform in the short- to intermediate-term after hitting all-time highs as compared to non-all-time high entry points, this trend reverses over longer holding periods. Specifically, for 10- and 20-year forward returns, buying at all-time highs materially underperforms all non-all-time high entry points.

Ultimately, two critical takeaways emerge from this analysis:

1.  Market timing based on whether markets are trading at all-time highs or at high valuations is particularly challenging, especially in the short-to-intermediate time horizons. This is mainly because there are thousands of inputs and factors that determine the market’s future direction. Attempting to time the market in this way is likely to disappoint clients and erode the trust between you and them, potentially putting your advisory practice at risk.
2.  Regardless of whether markets are at all-time highs, research consistently demonstrates the value of adhering to a strategic policy portfolio rather than a tactical one. The good news is that, according to our research on risk appetite, allocations have remained very stable over the past decade.

Positive investor behavior should be the headline in 2025

More notable than the market highs we’ve experienced in 2025 is the continuation of extremely positive investor behavior. Instead of performance-chasing or bailing out of markets, investors, in aggregate, have largely stayed the course.

Our hypothesis? The evolution in advisor value propositions. Advisors are increasingly anchoring their practices in goals-based financial planning. This approach encourages rebalancing portfolios back to client financial plans based on guardrails outlined in their personalized investment policy statements rather than letting fear or greed take over.

This has been a hugely powerful and positive shift in the industry—one that aligns with the principles of Vanguard’s Advisor’s Alpha® concept and the behavioral coaching strategies we’ve long advocated.

By focusing on what advisors and their clients can control—goals, costs, balance, and discipline—advisors are helping clients navigate market and emotional volatility. And, in doing so, advisors are giving clients a greater likelihood of realizing their long-term financial goals and reinforcing the enduring value of advice.

We’re here to support you and your clients in all types of markets. For detailed information and resources, we encourage you to:

• Connect with your sales representative.
• Visit the Advisor’s Alpha section of our website.

Notes:

• All investing is subject to risk, including possible loss of principal.
• Please remember that all investments involve some risk. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
• Past performance is not a guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.
• Investments in bonds are subject to interest rate, credit, and inflation risk. Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.