On Monday, stocks were getting destroyed with all the major US indexes falling more than 2%.
This led to some discussion about how a drop of more than 1% impacts stocks for the rest of the year.
The short answer is that it does and also doesn’t.
Stocks, as we write time and again, usually go up. They also can go down (and if you ask our EIC Henry Blodget, they might go WAY down.)
But in a note to clients, Robert Sluymer and his team at RBC Capital Markets nailed what all stock market predictions are really about in one perfect slide.
“Stock market history” is fancy way of saying “cherry-picked stats from the past.”
Sometimes this tells us a cautionary tale of past excesses that ended disastrously. Other times this is utterly useless.
Such are the pitfalls of inductive reasoning.