02/08/2023
What can we expect from the stock market in 2023? After a bear market year, what happens next? These are some of the questions we're hearing from investors lately, and while there is no way to know what will happen in 2023, market history can help us distinguish between what usually happens and what tends to be a rare occurrence.
Looking back at the S&P 500’s calendar-year returns and largest intra-year declines since 1980, it’s clear that stocks are up most of the time. The S&P 500 gained in 32 of the last 42 years.
Down years in the market were usually followed by years of good gains. While stocks have had back-to-back calendar-year declines, as in 2000-2003, in most instances, stocks have bounced back.
A positive year for stocks isn’t necessarily an easy year for investors-- as the intra-year drawdowns indicate. Stocks have declined at some point in every year since 1980, though bear market declines (-20% or more) as we saw in 2022, have been rare.
On average, stocks have lost about -14% a year, so while stocks are off to a positive start to 2023, it’s reasonable to expect that we’ll see a pullback eventually.
Remember that this is the history of the S&P 500; other indexes, such as the tech-oriented Nasdaq 100 and the small-cap Russell 2000, have been more volatile over time, so if you invest in riskier areas of the market, you’ll want to adjust your expectations accordingly.
There is no crystal ball to tell us how this year or any year will unfold, and future markets are often different than most people expect. So try to stay open-minded about where the market is headed and focus on what you can control.
We're here to help. If you aren't sure if you're still on track after the market upheaval in 2022, set up a time to talk with an adviser: http://ow.ly/Ti0s50MIyN1
