For example, if the odds the market will rise over the next year were to fall significantly below two out of three, then the stock market would fall today to reflect those reduced odds-rather than wait. It is exactly what is expected from an efficient market: It will rise or fall at any given time to whatever level leaves it with roughly the same probability of rising. While you may be surprised by results such as these, you shouldn’t be. The difference between this percentage and my baseline is not statistically significant. On average, over the year subsequent to these woeful months, the stock market rose 65.4% of the time. ![]() So, to stack the deck against confirming this conclusion, I next focused on all months since 1871 in which the market was down over each of the trailing 1-, 3-, 6- and 12-month periods. This conclusion can seem too good to be true. If that assumption is wrong, then all bets are off anyway.) ![]() (The assumption underlying this statement, as with all others in this column, is that the future will be like the past. ![]() What this means: The odds the market will rise over the next 12 months are no different just because the market today has declined over the last year.
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