There’s optimism heading into 2023 for the S&P 500 and after a forgettable 2022, it’s justified. However, that could just be short-term positivity since the long-term prospects still reveal a lot of unknowns.
As history shows, downside in the S&P 500 is not common in consecutive years. Therefore, a 2023 bounce seems like the optimal play for long and short-term investors with the expectation that the U.S. Federal Reserve will stop raising interest rates.
After all, expecting more downside could have serious ramifications for the stock market. History is another indication of this, with financial crises occurring after consecutive down years.
“Consecutive down years are rare for US stocks, so after this year’s drop, there’s only a low probability they will decline again in 2023,” a Bloomberg report said. “Yet if they do, history shows that investors will have to brace for another very unpleasant 12 months.”