Despite some pullback in the past week, all the major indices, including the S&P/ASX 200 Index (ASX: XJO), are still at or near historic highs.
The ASX 200 is up a whopping 54% since the trough of the COVID-19 crash in March last year.
And according to Marcus Today director Marcus Padley, incredibly the S&P 500 Index (SP: .INX) has doubled over that same period.
"Even ignoring the pandemic, the S&P 500 has returned a compound 20.0%pa since the high BEFORE the pandemic," he said in his newsletter.
"It is up 29.5% in 1.4 years not including the pandemic."
The American market, which the ASX 200 often follows, is now trading at its highest price-to-earnings ratio (30.4) since the dot-com boom in the late 1990s.
'Chickens are for slaughter'
So is it time to pull our money out of shares? Is it all going to come crashing down, as it does occasionally?
Padley recommended investors hold firm.
"Do not sell. Do not go all Chicken Little over a few statistics," he said.
"Chickens are for slaughter and I abhor the chickens that sit on the sidelines and wag a finger at other people taking risk and making money."
Padley remembered "a wise old adviser" at Bell Potter criticising colleagues for investing in shares during the dot-com boom.
"And he was right. It was a house of cards," said Padley.
"But all he did was deny all his clients one of the best money-making opportunities in stock market history. So let's not get on a high horse."
Do not sell because ASX 200 shares are going up
The bears are basing their convictions on "a predictably weak-brained mean reversion assumption", according to Padley.
"It's gone up so it must come down. Not true. You do not sell because things are going up."
What the historic-high indices do indicate is that conditions are ripe for "the herd" to quickly change its mood.
"The US equity market (which will lead any sell-off) is expensive, it's overbought but it's not a sell until the herd thinks it has had enough," said Padley.
"But with the US markets floated on central bank money and, who knows,… this could go on for years."
He implored investors to try not to predict when a correction is coming, but simply be aware when it comes.
"Let's not be smarter than the herd. Let's just be on alert for the day it changes its mind because, from up here, it could… easily and quickly," said Padley.
"The air is thin and it's a lot easier to pass out at altitude."
