Weekly Market Recap This week saw continued good US jobs and retail sales data. Global markets gave up some ground after a five week rally. Pullbacks after strong rallies like we saw this October are quite normal. The Organization For Economic Co-operation and Development (OECD) released its economic update highlighting a decline in global trade in 2015, but noting its expectation that the global economy will progressively strengthen in 2016 and 2017.
It's worth remembering that the markets are relatively unpredictable in the short term. As such we believe day to day market performance is extremely hard to predict. However, for the longer term, such as over years or decades, our historical analysis suggests that markets are likely to deliver a positive performance. On any given day, the chance of the US market rising or falling is close to 50/50, essentially a coin toss. But over a decade, the US market has risen 93% of the time. This data is based on our analysis of the S&P 500's daily performance from 1950 to 2014.
We believe one of the reasons for this is that a very small bias to positive performance on a daily basis adds up over time due to the effects of compounding. Using history as a precedent, the chance of the market rising on any given day is 53%. However, even that 3% advantage over a 50/50 outcome has added up to impressive historical performance for stocks.
Though our analysis shows there is only a slight chance of the markets coming out ahead each day, statistically speaking, when you apply this probability across hundreds of days, the skew to positive outcomes becomes much greater. On the other hand the small bias to positive performance over the shorter term and can easily be overwhelmed by the volatility of the markets. This is one reason why we believe a portfolio weighted to stocks is prudent for investors with long term goals such as retirement.
Notes
Retail data: http://www.census.gov/retail/marts/www/marts_current.pdf
Jobs report: http://www.dol.gov/ui/data.pdf
OCED report: http://www.oecd.org/economy/economicoutlook.htm
Market returns over time: http://blog.futureadvisor.com/the-benefit-of-being-a-long-term-investor/
Disclaimer:
The views expressed are for informational purposes only and are not intended to serve as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell securities by FutureAdvisor. All expressions of opinion are subject to change without notice in reaction to shifting market, economic, or political conditions. The investment strategies mentioned are not personalized to your financial circumstances or investment objectives, and differences in account size, the timing of transactions and market conditions prevailing at the time of investment may lead to different results. Clients may lose money. Past performance is not indicative of future results. Investments in securities involve the risk of loss. Any tax strategies discussed should not be interpreted as tax advice and do not represent in any manner that the tax consequences detailed will be obtained. Clients should consult with their personal tax advisors regarding the tax consequences of investing. Your Portfolio Update Over the past month your portfolio was down 2.4%, and we have no recommendations at this time to improve it. Congratulations on maintaining one of the best portfolios among all our clients. We will, as always, continue monitoring your account and alerting you if there are actions to take (periodic rebalancing is required, etc). Ways To Improve Your Portfolio | 0 Accounts with Actions | Your portfolio has no recommended actions right now. We'll watch over your investments and alert you with an email when there are actions for you to complete. Sign in to see detailed steps  | | Sign in to see your full dashboard | | 
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