I’m trying to wrap my head around the worst case scenario for the stock market in the long term. We use the rule of thumb that SP500 has historically beat inflaton long term at an adjusted 7% average YOY. But this assumes people are long these stocks. Couldn’t we say the same if the SP500 was down 7% YOY and people had short positions? In theory they would make the same amount of money.
I understand the risk of shorting is infinite downside but for the sake of thought experiment let’s assume the SP500 declines 7% YOY for the next 30 years. If you have a short position wouldn’t you make the same amount as if you were long and the SP500 was up 7%?
It seems like the stock market not moving at all is the worst case scenario, where there’s no velocity in either direction and hence no way to make money in either position. What am I missing here? Thanks.