I had a well-worked-out forecast for what would happen to stocks after the mid-term elections. It was smart, logical, and 100% wrong. Quite why is an interesting question, and shows how hard it is to predict markets even when events go exactly as predicted.

My flawed prediction was that US stocks would fall in the event of the widely expected Democrat win of the House and Republican retention of the Senate.

The argument started with the probabilities. Bets on the Iowa Electronic Markets before polling day had the split Congress at about 60%, a roughly 30% chance of the GOP keeping House and Senate and a “blue wave” giving the Dems control of both at just 10%.

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