You have a 72% chance of making money in stocks in 2025

There’s a 73% probability the U.S. stock market will rise in 2025. These odds seem too good to be true, of course, since the market this year has already produced a well-above-average return — 28.2% as of Dec. 16, as measured by the Vanguard Total Stock Market ETF VTI+0.14%.

That’s triple the U.S. market’s average calendar-year return of 9.2% going back to 1794 (according to the database constructed by Edward McQuarrie, an emeritus professor at Santa Clara [Calif.] University).

Yet the market’s odds of rising in a given year are remarkably indifferent to what came before. Based on all calendar years in McQuarrie’s database, the market’s odds of rising in any given year are 73%. Following calendar years in which stocks rose, those odds are a statistically indistinguishable 72%.

What about five-calendar-year periods over which the market rose? Those odds would apply to 2025, since over the past five years the Vanguard Total Stock Market ETF has produced a 14.9% annualized return. The odds of the market rising in a calendar year following five-year gains are once again statistically similar — 72%.

What are the odds when coming off decade-long advances, such as the last one — over which the Vanguard ETF has produced a 13.4% annualized return. Following 10-year periods in which the market rose, the odds of the market rising in the subsequent calendar year are 73%. (These odds are plotted in the chart above.)

A gambling analogy helps illustrate what these statistics mean. Ask yourself: What odds would you place on a coin flip coming up heads if it had come up heads in each of the five previous flips? Or if the previous five flips had each come up tails? Many of us give different answers to these two hypotheticals, as if the odds that apply to the sixth flip have anything to do with what came before. They do not, of course, since the coin has no memory: The odds of that sixth flip coming up heads are always 50%. To think otherwise is to be guilty of what is known as the gambler’s fallacy.

It makes theoretical sense that the same is true of the stock market. If the odds of the market rising in a given calendar year were actually correlated with what had come before, then shrewd traders wouldn’t wait until January of that next year to exploit that correlation. They would instead place their bets in the preceding November or December, with the consequence that the gain or loss that otherwise would occur in that year would be transferred to those prior months. The net effect would be the correlation’s disappearance.

You may have other reasons to expect equities to do particularly well or poorly in 2025, of course. The stock market is extremely overvalued, for example, according to almost any valuation measure with a decent long-term record. But valuation only exerts its gravitational pull on the market over long periods of time, such as a decade. Over shorter periods, including calendar years, valuation indicators have relatively little predictive ability.

The bottom line? Based only on how the stock market performed this year, the odds of the stock market rising in 2025 are no higher or lower than they would be if equities were currently sitting on a big year-to-date loss.