why can't we predict the stock market?

[clatoden99]

With so many random variables, we can still predict the weather for the next day, then why can't we predict the stock market?

[feh]

With so many random variables, we can still predict the weather for the next day, then why can't we predict the stock market?

Physics vs human behavior. Two totally different things (one is predictable, the other irrational).

[Jluke]

good day to add some shares to existing investments:

MO
BRKB (kid's account)
FSTVX
FSEVX

no fees either!

[Tabs]

I think the main issue is that the stock market is controlled partly by market mood swings and partly by fast trading bots. It, in no way, represents actual market realities or rational basis... at least not in the short term.

With weather, we are only trying to predict a series of natural phenomenons rooted in some kind of rational cause and effects found in nature. So, it's theoretically possible to model for everything, but it's just a very complex model, that's all.

[Singuy]

Stock market will always go up
Stock market will always crash/make corrections
On average, your return will be 8%ish over a long period of time


That's pretty much it...everything else will just drive you crazy. You can study up on what causes stock market corrections all you want, but the reasons are just nonsense. Today is a good example..fed hinted at raising interest rates and then BAM, stock market sell off....as if people have no idea that interest rates will eventually go up? Trying to make sense out of the stock market is almost like trying to make sense out of what your teenage daughter is going to do on daily basis while going through puberty.

[disneysteve]

Stock market will always go up
Stock market will always crash/make corrections
On average, your return will be 8%ish over a long period of time


That's pretty much it...everything else will just drive you crazy. You can study up on what causes stock market corrections all you want, but the reasons are just nonsense.

Exactly. There's really no point in trying to predict the unpredictable. Just invest steadily throughout your working years and you'll be fine. Don't try to time the market. It is affected by far too many factors that can't be predicted or controlled including human emotion.

As for the weather, I'm not a big fan of those predictions either. This past week was a perfect example. There were all kinds of storm warnings about Hermine. People cancelled vacations or went home early. Businesses closed. Emergency decrees were issued. And then the storm took a right turn and went out to sea. I know a lot of people around here while happy the storm didn't hit were pissed that it ruined vacations or had them spend days prepping for it for no reason. Weather predicting is far from an exact science.

[james.hendrickson]

Stock market will always go up
Stock market will always crash/make corrections
On average, your return will be 8%ish over a long period of time


That's pretty much it...everything else will just drive you crazy. You can study up on what causes stock market corrections all you want, but the reasons are just nonsense. Today is a good example..fed hinted at raising interest rates and then BAM, stock market sell off....as if people have no idea that interest rates will eventually go up? Trying to make sense out of the stock market is almost like trying to make sense out of what your teenage daughter is going to do on daily basis while going through puberty.

There are underlying macro historical reasons why the stock market goes up. These include; population growth, increased productivity, political stability and technological improvements, etc. etc. The day to day and month by month fluctuations in the market can be due to seasonal factors, based in short term news or immediate macroeconomic policy changes.

[sv2007]

With so many random variables, we can still predict the weather for the next day, then why can't we predict the stock market?

Everybody is predicting the stock market. If nobody predicts it'll rise, then why would anybody invest in it? So there you go. Everybody THINKS they can predict the market.

But, I think I understand your real question. You will find the answer with the technical traders; they THINK they can predict the market like the weather; instead of reading the winds, they go with sentiment reflected by price movement.

That's the simplified version, but you'll find your answers there.

[TexasHusker]

The underpinning of any stock investment is ultimately earnings or the anticipation thereof.

As a company earns more, its share price generally reflects this.

The "stock market" is comprised of thousands of such companies. As overall earnings decline, so does the overall average, and vice versa.

It's not really as mysterious as it first appears. But predicting any average is like predicting the average temperature in the United States tomorrow. It not only can't be done, but it isn't relevant anyway, unless you are investing in an ETF that is directly tied to one of the averages.

Investing in the averages is basically just tossing darts blind folded. If you toss at the wrong time you could lose a lot, and if you're lucky you could surf a pretty good wave for a while. And just because "it" has averaged an 8 percent annual return over the last XX number of years, that IN NO WAY MEANS it will continue doing so. A protracted bear market - which also can occur - is capable of erasing a decade worth of gains. Many investors today have not lived through an extended bear market.

So in the end, buying the averages is more speculating than investing. It is simply assuming that "all the trees will keep growing because they have for the last XX years." In the next bear market, those investors will be asking "what happened to my average"? There's a lot of ugliness and disappointment in those times. I've lived through it.