Numbers aren’t susceptible to hype or horror. Nobody’s trying to pump them up or scare them. With that in mind, without guessing, would you say the market is overheated, depressed or right on track?

Fans of the “overheated” argument love to point out prediction after prediction of a recession lurking just over the horizon. Maybe it’ll be a savage recession like we saw in 2008, taking out big banks and wrecking the housing market for a generation.

After all, the Fed seems hell bent on slowing the economy down enough to finally kill inflation. Their own forecasts suggest that GDP growth will slow next year while unemployment surges.

And besides, corporate earnings seem to have hit a wall in the face of the highest interest rates since the 2008 crash. No growth makes it very hard to support what are now elevated valuations . . . P/E for the S&P 500 is now 18.7, which seems high to a lot of people.

Then there are the miscellaneous fear factors. War. Politics. Government gridlock and a potential shutdown. Bond yields. Demographics. Cultural exhaustion, whatever that means.

In light of all these threats, there aren’t a lot of people arguing that the market is substantially overvalued or even cheap. This is not a generational entry point. People like Warren Buffett are stockpiling cash because they can’t find anything worth buying . . . while literally trillions of dollars are hanging out in money markets earning an easy 5% a year.

Unless you can argue that the future will be better than the present, stocks might be worth holding but not really worth grabbing. But here’s the key to that side of the question: the future does look like it will be better.

The Fed will probably start cutting rates next year as long as inflation keeps edging lower. There’s no recession required for that. It’s simply an admission that as inflation slows down, nominal rate cuts are required to keep all the numbers balanced.

Lower rates will feel good. And of course cooler inflation will feel good as well. To watch both gauges go down will prove to everyone that we’ve survived the worst the cycle can dish out. We’re strong enough for this. We’ve got it under control.

I have to say previous generations of investors weathered higher interest rates, higher bond yields and higher inflation than we’ve seen lately . . . and Wall Street somehow managed to not only endure the pressure but thrive. A lot of wealth got created.

As it is, earnings growth is back on the table. The corporate recession is over. And right now, the Fed thinks unemployment might climb to 4.1% next year. That winds the labor market back to late 2017 or early 2018.

That obviously wasn’t the end of the world. And as investors, we kind of need to see the world cool off a little, especially in the labor market. It’s overheated. A lot of employers are still shutting down rather than raising salary offers to levels that will attract workers.

As it is, we’re looking for the S&P 500 to earn about 11% more next year. That number may be high, but to be honest any positive expansion rate is a whole lot better than the negative comparisons we’ve had to put up with all this year.

And there you have the bear side and the bull side. What do the numbers tell us?

Turns out that over the past 12 months the S&P 500 has climbed about 13% and inflation has taken 3% of that away, leaving investors with a real 10% return. That’s roughly average.

It’s been an average year. Maybe it doesn’t feel like it because of all the noise and the lingering impact of all the shocks of recent years, but 10% after inflation is typical.

Before and after the 2008 crash, 10% a year was typical for the S&P 500. Going back to the Great Depression, 10% was normal.

Of course not every year is normal. Some will be extremely bullish and some will be nightmares. But across decades, we can look forward to about 10% a year on the “random walk,” maybe a tiny bit less.

We haven’t had a normal year in a long time. While 2018 was weak and 2019 was OK, 2020 turned into an overheated rally thanks to the Fed and then 2021 continued that accelerated runway. After that, 2022 took a lot of the gains away.

But this year has been “normal.” And when you go back across the 5-year period, all those peaks and valleys even out into something like normal too.

You needed to put up with a lot of headaches and second guessing in those five years. The anxiety got unbearable for many. The exuberance of the zero-rate boom created unreasonable expectations for others . . . and now that those expectations have been punctured, they’re frustrated, sullen and angry.

But those of us who know the math are aware that we can reasonably expect about 10% a year after inflation. That’s what our ability to put up with the headaches and protect our convictions buys us.

If that’s worth it to you, you can thrive in the market. This is the place for you. Just know that you can probably double your money every 7-8 years.

And if you can’t handle the pressure, you’ll need to settle for lower returns. Consider bonds. Lock in dividends on reliable stocks. There’s no pain in that . . . but keep in mind that it will constrain your gains.

There’s no gain without accepting the possibility of suffering at least a little temporary pain. That’s what risk means. It’s a measurement of how stressful things can get before you push the eject button.

I’ll put up with the market rollercoaster in order to capture 10% a year. Of course I won’t settle for that. Even my smoothest and least volatile portfolio (Value Authority) has hit an annualized return of 10.7% over time. That’s the floor around here.

For those who can handle a little more heat in pursuit of bigger wins, GameChangers has hit an annualized 18% over the past decade . . . bear and bull markets, recessions and rebounds. IPO Edge and Triple-Digit Trader have done even better.

They’re not for everyone. You need to be able to keep your cool when the occasional trade goes against us and we end up booking a 30% or 40% or even a 50% loss.

But we stay open to that pain because we know that we’ll capture enough 40% or 60% or 100% wins to make everything feel better . . . and more importantly, make the long-term math work out. The numbers don’t lie. It’s why I love them.