Investors rattled by today’s financial headlines may be overlooking a straightforward statistical reality about how markets tend to behave.
According to MarketWatch contributor Mark Hulbert, there is a 68% probability that the U.S. stock market will finish the year higher than where it currently stands.
That figure has nothing to do with the war in Iran, oil prices, inflation, the November midterm elections, or SpaceX’s IPO prospects.
The 68% odds are derived from a simple historical calculation stretching back more than a century of market data.
Specifically, that number reflects the percentage of calendar years since the Dow Jones Industrial Average (DJIA) was created in 1896 in which the Dow rose from July through December.
Hulbert notes he has been unable to find any objectively defined subset of years since the late 1800s in which the stock market’s second-half probability was significantly higher or lower than that all-year average.
The implication is clear: no particular set of current events meaningfully changes the underlying odds for the market’s direction over a six-month window.
Hulbert describes this pattern using a term familiar to statisticians, noting that the market follows what is known as a “random walk with an upward drift.”
That means the stock market can carry 68% odds of rising in any given six-month period, while simultaneously offering zero predictability for which specific six-month periods will fall inside that 68%.
The stock market’s returns over shorter-term time horizons are largely statistical noise, which is not inconsistent with equities exhibiting a long-term uptrend.
Hulbert offers a vivid illustration of how misleading near-term narratives can be for investors trying to time market moves.
Imagine being told last January that the next six months would include a Middle East war, surging oil prices, and the highest U.S. inflation since the COVID-19 pandemic, to name just a few of the factors affecting investors.
Few people hearing those predictions at the start of the year would have concluded the U.S. stock market would manage to finish higher despite all of those headwinds.
Yet that is precisely the kind of outcome that historical data suggests is entirely plausible, even likely, regardless of how alarming the news cycle appears at any given moment.
The core lesson Hulbert draws from all of this is how difficult it is to time the market’s short-term gyrations based on current events alone.
For long-term investors, the practical takeaway is that reacting to headlines by reshuffling a portfolio is unlikely to improve outcomes and may well harm them.
