Bears have Terrible Odds
August 2, 2021
≈ No wonder they don’t have friends.≈
Traders,
A bear is a trader who bets on lower prices. Given all the terrible things that happen globally, you might think they have a decent chance of making money wagering on declining markets. When I first started, I thought their probability of success was at least decent.
Boy, was I misinformed.
It’s not even in the same zip code as “decent.”
The odds are monumentally stacked against them. And, it gets even harder the longer they decide to cling to their pessimistic positions. Today’s chart of the day helps illustrate this by revealing the percentage of rolling periods with positive returns for the S&P 500 since 1926. It encompasses nearly 100 years of data and includes reinvested dividends.
If you flip it on its head, it shows the pitiful plight of naysayers who want to speculate on a crash.
Want to bet on stocks being lower a year from now? Your odds are a measly 24.5%.
How about banking on stocks being lower three years from now? You only have a 15.9% chance of success.
Lengthen your bearish wager out to five years, and you’re looking at an 11.8% probability of profit.
Bet against America for the next decade, and your odds fall to a grim 5.6%.
No wonder bears are so surly. They fight an uphill battle every time they step onto the field.
#TeamTackle
Chart of the Day
The Bullish History of the S&P 500
Per the definition outlined above, the S&P 500 has a powerful tailwind. Betting against it for an extended period is a fool’s errand. When it comes to the stock market, time does indeed heal all wounds. Keep this in mind next time equities hit a speed bump.
Video of the Day
Coach Frank’s Charts
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