By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel generally agreed that while dollar-cost averaging into index ETFs is a long-term strategy, current elevated valuations and concentration risks pose significant near-term challenges. They warned of potential volatility and multiple compression if inflation remains sticky.
Risk: A liquidity-driven blow-off top that punishes the cautious, potentially ballooning valuations further.
Opportunity: Rotation to laggard stocks if rates fall, diluting blow-off top risk and capping multiple expansion for VOO/QQQ.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
The S&P 500 hitting new highs isn't uncommon.
Using a dollar-cost averaging strategy with ETFs is one of the best ways to invest for the long term.
The market has been on a roll lately, with the S&P 500 (SNPINDEX: ^GSPC) setting new highs throughout May. If you think you missed your opportunity when the market bottomed in late March, don't fret. The market hitting new all-time highs is not particularly rare and should not change your investment strategy. And if you are thinking of waiting for the next dip, I'd think again.
According to a J.P. Morgan study, since 1950, the S&P 500 has hit an all-time high on about 7% of trading days. Meanwhile, nearly a third of the time, the market never trades lower after hitting those highs. This means there is a great chance that investing today will be a profitable endeavor, and of course, the longer your holding period, the better the odds.
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There is also a big opportunity cost from waiting for a stock market dip that may never come. In addition, even if you were able to correctly predict the next market correction, you'd have to correctly predict the right time to get back in. The market's best days are often after big sell-offs, and if you hesitate to get in, you'll be leaving a lot of gains on the table.
As such, the best market strategy remains dollar-cost averaging, and the best vehicle for this strategy is index-based exchange-traded funds (ETFs). Why ETFs are better suited for dollar-cost averaging than individual stocks is that, quite frankly, most individual stocks underperform the market.
A separate J.P. Morgan study found that between 1990 and 2020, 40% of stocks experienced a decline of 70% or more from which they never fully recovered, while two-thirds of stocks underperformed. However, a few mega-winners typically propelled the market higher.
Given that dynamic, centering your portfolio on one or two core ETFs and consistently dollar-cost averaging into them over the long term is one of the smartest moves an investor can make. Two great options for using this strategy are the Vanguard S&P 500 ETF (NYSEMKT: VOO) and the Invesco QQQ Trust (NASDAQ: QQQ).
The Vanguard S&P 500 ETF tracks the S&P 500 and provides investors with an instant, diversified portfolio of the 500 largest publicly traded U.S. companies. The ETF has a strong track record, generating an average annual return of 15.2% over the past decade, as of the end of April. Only about 14% of actively managed funds have outperformed the S&P 500 over the past decade, making it a great investment option.
For investors looking for more growth and tech exposure, the Invesco QQQ Trust is a great option. While more concentrated, it has consistently outperformed the S&P over the past decade, generating an average annual return of 21.1% over that stretch.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Geoffrey Seiler has positions in Invesco QQQ Trust and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends JPMorgan Chase and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Historical performance data justifies long-term indexing, but current valuation multiples leave zero margin for error in the face of macroeconomic headwinds."
While the article correctly highlights the mathematical futility of market timing, it ignores the critical role of valuation in expected forward returns. We are currently trading at a forward P/E of roughly 21x for the S&P 500, significantly above the 10-year average of 17.8x. While dollar-cost averaging into VOO or QQQ is a prudent long-term strategy, current entry points are pricing in near-perfect execution on earnings growth and interest rate pivots. Investors should be prepared for a period of multiple compression if inflation remains sticky, as the 'all-time high' narrative often masks underlying sector concentration risks that could lead to significant volatility in the next 12-18 months.
The strongest case against this caution is that market multiples are currently supported by unprecedented AI-driven productivity gains and high profit margins, which may justify a permanent structural re-rating of the index.
"DCA into VOO/QQQ remains robust long-term despite highs, but current 21x P/E and narrow breadth elevate near-term pullback risks the article ignores."
The article makes a solid historical case: S&P 500 highs occur 7% of days since 1950, with 1/3 never retracing, and DCA into VOO (15.2% 10-yr ann. return) or QQQ (21.1%) beats most active funds and individual stocks, per JP Morgan. But it glosses over today's elevated valuations—S&P forward P/E ~21x vs. 15-17x long-term avg—and extreme concentration (top 7 stocks ~33% of index, Nasdaq-100 even narrower). Market breadth is poor (only ~25% S&P stocks at 52-wk highs), signaling potential volatility. Long-term (10+ yrs), DCA works; near-term, opportunity cost cuts both ways if recession hits.
Historical odds heavily favor buying highs for long horizons, as mega-winners like today's AI leaders could propel VOO/QQQ far higher regardless of starting valuations, making waiting riskier.
"Dollar-cost averaging into all-time-high valuations without acknowledging current forward P/E multiples, earnings growth rates, and macro headwinds (potential recession, geopolitical risk, AI capex ROI uncertainty) is incomplete advice that conflates a sound *strategy* with favorable *entry conditions*."
The article's core argument—that all-time highs shouldn't deter investors—rests on cherry-picked data. Yes, the S&P 500 hit new highs ~7% of trading days since 1950, but that's a 74-year period spanning multiple regime changes: Bretton Woods, stagflation, QE, and now potential rate normalization. The J.P. Morgan studies are real but incomplete: they don't address *valuation* at entry points. The S&P 500's 15.2% annualized return over the past decade occurred during a historic bull market with declining rates and multiple expansion. The article conflates 'time in market beats timing' (true) with 'valuation doesn't matter' (false). QQQ's 21.1% return is presented as outperformance, but that's backward-looking and heavily concentrated in Magnificent 7 names—a crowded trade.
If the Fed is genuinely done hiking and inflation stays anchored, multiple expansion could continue and valuations matter less. Additionally, the opportunity cost of waiting—missing the 10 best days in the market—is mathematically real and the article's emphasis on this is not wrong.
"Valuations are stretched, and macro/earnings risk could dwarf the benefits of dollar-cost averaging into ETFs if rates rise or growth disappoints."
The article advocates dollar-cost averaging into index ETFs as a long-term, low-friction strategy, but it glosses over two critical risks: (1) current valuation levels across the S&P 500/QQQ are elevated by historical standards, and (2) macro factors (rates, inflation, earnings resilience) can flip quickly, particularly with tech concentration. The piece relies on historical studies of highs and past mega-winner stories, which don’t guarantee future returns. It also omits risk controls, diversification beyond US large caps, and potential opportunity costs of staying fully invested in a narrow ETF mix. A robust stance should stress risk management alongside passive exposure.
On the other hand, a regime of steady growth and supportive rates could keep mega-cap winners elevated, validating the article’s DCA approach; the real risk is underestimating upside if policy stays favorable and AI-driven productivity accelerates.
"Excess liquidity in money market funds acts as a catalyst for further multiple expansion, regardless of current valuation concerns."
Claude, you correctly identified that the 15.2% return is a product of multiple expansion, but you missed the liquidity tailwind. We are currently seeing a massive rotation into cash-like instruments and money market funds—roughly $6 trillion sitting on the sidelines. If the Fed pivots, that liquidity will chase the same narrow concentration you and Grok fear, potentially ballooning valuations further. The risk isn't just valuation; it is a liquidity-driven blow-off top that punishes the cautious.
"Sideline liquidity is more likely to drive breadth expansion than fuel a narrow blow-off top."
Gemini, your $6T MMF liquidity point assumes it floods back into the same Mag7 concentration, but poor market breadth (just 25% S&P stocks at 52-wk highs) and equal-weight S&P (SPY vs. RSP) underperformance signal rotation potential to laggards if rates fall. This dilutes blow-off top risk, spreading gains and capping multiple expansion for VOO/QQQ.
"Liquidity rotation is binary—concentration or compression—and the article ignores both tail risks by assuming historical DCA patterns hold in a regime-shifted environment."
Grok's rotation thesis assumes breadth improves if rates fall, but that's speculative. The real tell: if $6T floods back and *still* concentrates in Mag7, we get a blow-off top. If it rotates to laggards, valuations compress across the board—neither scenario validates the article's 'buy at all-time highs' framing. The liquidity tailwind Gemini flagged could fuel either outcome. That binary risk is underpriced.
"The $6 trillion liquidity tailwind is not a guarantee of higher Mag7 valuations; inflows may be slow, regulated, or rotated into breadth-impaired assets, capping multiple expansion and increasing dispersion risk."
Gemini's liquidity point is the most actionable risk, but the assumption that it will inevitably fuel a Mag7-led blow-off deserves scrutiny. Inflows could be staggered, constrained by risk parity rules, or diverted to alternative assets; even a Fed pivot would not automatically translate into universal multiple expansion if breadth remains poor and inflation resilience stalls. That would leave the market prone to sharp reversals and a higher dispersion of returns.
The panel generally agreed that while dollar-cost averaging into index ETFs is a long-term strategy, current elevated valuations and concentration risks pose significant near-term challenges. They warned of potential volatility and multiple compression if inflation remains sticky.
Rotation to laggard stocks if rates fall, diluting blow-off top risk and capping multiple expansion for VOO/QQQ.
A liquidity-driven blow-off top that punishes the cautious, potentially ballooning valuations further.