Wall Street Is Worried About a Market Crash. 75 Years of History Says Investors Should Be Watching Something Else.

Investors aren't exactly short on reasons to worry.

The Shiller cyclically adjusted price-to-earnings (CAPE) ratio, which measures stock prices against 10-year inflation-adjusted earnings, and the Buffett indicator, the ratio of stock prices to GDP, show that the S&P 500 (SNPINDEX: ^GSPC) is historically expensive. Leadership has been extraordinarily concentrated in megacap tech stocks. Inflation is well above 3%. Long-term Treasury yields are at multidecade highs. And beneath the surface of the major indexes, market breadth has weakened considerably.

Any one of those could sound like a reason to prepare for the next market crash. But decades of stock market history suggest investors may be obsessing over the wrong things.

Instead of asking if and when stock prices will fall next, I'd ask a much simpler question: How long can you stay invested?

Image source: Getty Images.

Time has been a consistent solution for volatile markets

The S&P 500 has been remarkably efficient at producing long-term returns. Consider the following stats:

• Positive returns in roughly 73% of one-year periods.
• Positive returns in roughly 94% of 10-year periods.
• Positive returns in 100% of 20-year periods.
• The worst 30-year average annual return in history was 7.8%. And that began with the Great Depression.

That's an incredible track record considering some of the major market events that have occurred during that time: the 1970s stagflation crisis, the 1987 Black Monday crash, the tech bubble crash, the 2008 financial crisis, the COVID-19 bear market, and the inflation shock of 2022. That doesn't even include the periodic high-valuation and rising-rate environments that have occurred along the way.

Yet one thing has consistently kept pushing stocks higher over the long term: corporate earnings growth. In 1985, S&P 500 earnings per share were $44.63. Forty years later, index earnings have grown to $247.96 in 2025. That's an increase of more than 450%.

That's why I'd still own VOO

Historically, investing at higher valuation levels often means lower forward-looking long-term returns. A 5%-plus Treasury yield makes bonds look more competitive relative to stocks.

But valuations and short-term economic risks do a better job at shaping future return expectations than as a signal for when the next crash will occur. The Vanguard S&P 500 ETF (NYSEMKT: VOO) remains one of the best ways to invest in U.S. large-cap stocks.

The Vanguard Total Stock Market ETF (NYSEMKT: VTI) is another option if you want to choose the entire investable U.S. stock market. These are the types of products that investors should be considering as long-term investments, regardless of short-term valuation levels or economic signals.

As long as corporate earnings continue to grow, the S&P 500 is on a long-term path higher. The rest is just short-term noise.

David Dierking has positions in Vanguard Morningstar Total Stock Market ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.