Win on the stock market in 2022? The odds are in your favor

The year is ending and it is time to think about how the next one will be. Among the objectives and new purposes of more than one for 2022 may be to make money investing in the stock market. If that’s the case, the chance of achieving it is 66%. Without a doubt, much higher than going to the gym every day.

As surprising as it may sound, the probability of the stock market rising next year is the same as it was in 2021 and 2020 and so on, regardless of past trends or whether the previous year was above average. This is because The stock market discounts the future, not the pastOr, as some investors often think.

According to the efficient market hypothesis, share prices reflect all available information that exists, which makes it impossible to obtain an economic benefit from a future event that affects its price. In other words, there is no use doing a historical analysis of stocks because the market will rise or fall based on changes in expected future returns.

A theory that is corroborated by the analysis of the profitability of the Dow Jones Industrial Average since its inception in 1896 which publishes MarketWatch. The record shows that the market has risen in 66% of cases. Likewise, the probability that in a given calendar year the market will rise when it also did the previous one is the same, 66%. In the event that the stock market rises after having fallen the previous year, this probability rises to 67%, practically the same as if the trend had been the opposite.

The only exception seems to be when the market fell more than 20% in the previous calendar year. In this stage, the chances of the market going up the following year are over 80%. This is something rare that has only occurred 11 times, a sample too small to support a hypothesis.

JPMorgan expects more earnings in 2022

For his part, JPMorgan’s Marko Kolanovic disagrees with the consensus estimates for the future and argues that 2022 it will be another year of increases in equities driven by earnings growth, an improved context for China and emerging markets, and a normalization of consumer habits.

US companies could register 14% profit growth above the most conservative consensus estimates. According to Kolanovic in a press release, these estimates do not correspond to the strength of the economy that has been consolidated after the pandemic and does not reflect the high household savings or expanding labor markets. Profits that could grow even more if China abandons its recent regulatory policy or reduces trade tension with the United States.

Despite the recent reduction by the Federal Reserve (Fed), Kolanovic expects that central bank policy remains largely accommodative, “with a further expansion of $ 1.1 trillion in the balance sheet of developed market central banks through the end of 2022 and a more dovish Fed relative to current pre-election market expectations midterm in United States”.

When it comes to rising inflation, Kolanovic sees it more like a rotation and notes that the companies’ record liquidity and strong fundamentals should boost capital investment, inventory replenishment, shareholder profitability and M&A activity, according to publishes. Business Insider.