The Stock Market Has Seen This Happen Only 2 Other Times in Over 150 Years, and History Has an Ominous Warning for Investors

The stock market has witnessed such an occurrence only twice in more than 150 years, and history offers a cautionary tale for investors. The S&P 500 has risen nearly 120% over the past four years, driven by the AI boom. However, the bull market may be losing momentum, as only a few stocks are powering the index. Over a quarter of stocks in the S&P 500 are down 40% or more from their highs, and nearly 60% are below their 200-day moving average.

Renowned investors, like Michael Burry and Ray Dalio, have warned that the AI bubble could burst, comparing the current market to the dot-com bubble. The cyclically adjusted price-to-earnings (CAPE) ratio, currently above 40, its second-highest level, also suggests a potential market correction. While the urge to sell stocks might be strong, timing the market rarely proves successful.

Instead, staying invested through dollar-cost averaging into a broad market index ETF, like the Vanguard S&P 500 ETF, is the recommended approach. Legendary investor Peter Lynch emphasized that staying invested, regardless of timing, is crucial for long-term success.