S&P 500 Could Rise in the Short Term, But Long Term Still Unknown

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.”

“Since 1928, the S&P 500 Index has only fallen for two straight years on four occasions: The Great Depression, World War II, the 1970s oil crisis and the bursting of the dot-com bubble at the start of this century,” the report added.

With the end of 2022 in sight, the stock market is starting to show signs of upside already. Two companies, Nike and FedEx, showed positive earnings, which could be a harbinger of what’s to come: better-than-expected earnings.

“We got sort of oversold and I think the market was looking for an excuse to rally, and the Nike and FedEx number provided that,” said Sam Stovall,  chief investment strategist at CFRA Research, via a CNBC report. “I really question, however, if this is something that’s going to be long-lasting.”

Choosing a Side

When it comes to trading the S&P 500, investors don’t have to wait idly and buy the dips, then wait for the next bullish move higher. Advanced investors can trade both bullish and bearish moves using Direxion Investments’ leveraged exchange-traded funds (ETFs).

Whether it’s short-term strength or eventual weakness in the long-term, traders can play both sides of the S&P 500. When the S&P 500 rises, traders can play to the upside with thrice the leverage using the Direxion Daily S&P 500® Bull 3X Shares ETF (SPXL).

To profit on the downside in the short term, traders can use the Direxion Daily S&P 500 Bear 3X ETF (SPXS). Opposite of SPXL, SPXS seeks daily investment results equal to 300% of the inverse of the daily performance of the S&P 500 Index.

For more news, information, and analysis, visit the Leveraged & Inverse Channel.