Odds are good the stock market will be higher in 12 months’ time.
The probabilities are two out of three, in fact.
These odds are not based on any privileged insight into whether the economy will experience a soft landing, the future course of the Federal Reserve’s interest rate policy, or anything else for that matter. They instead are based on the historical tendency of the stock market to rise in two out of every three 12-month periods—regardless of whether those periods come in the wake of a roaring bull market or a punishing bear market.
To calculate these odds, I focused on the stock market’s inflation-adjusted total return since 1871, courtesy of data compiled by Yale University’s Robert Shiller. On average across all 12-month periods over the last 150+ years, the market rose 69.2% of the time—very close to two out of three. That’s the baseline.
I next compared that baseline to the percentage of positive one-year returns following months in which the stock market had declined over the trailing year. For this subset, the percentage was essentially the same at 70.4%.
