6 Market Predictions For 2023, #132
Hindsight is always 20/20. However, I thought it would be fun to give my market predictions for 2023 at the beginning of the year to see how close I can get. On this episode, I’m going to share six market predictions for 2023 along with historical and financial analysis to support my take.
You will want to hear this episode if you are interested in...
Will the S&P 500 make a comeback? [1:53]
Which will outperform: Growth or value stocks? [4:20]
Large cap or small cap stocks? [6:54]
Bitcoin or gold? [9:37]
Domestic or international stocks? [11:49]
Will interest rates continue to rise? [14:19]
History in the making
The S&P 500 is a collection of the 500 largest stocks in the United States. Last year, the S&P 500 declined 19.4%, making it only the 32nd decline in the last 96 years. That means it has only experienced a decline one-third of the time, with the average being around 14%. While the S&P 500’s 2022 decline was higher than average, it’s by no means the worst historical decline.
Another historical gem about the S&P 500 is that it rarely experiences back-to-back declines. There have only been 10 occurrences of consecutive negative returns in its history. The last time we saw this was when the dot-com bubble burst, and 2001 through 2003 saw a decline. Typically when the S&P 500 has a negative return, the following year sees a double-digit increase of 20% or more. That’s why my prediction for 2023 is that the S&P 500 will see a 28% increase, making it firmly 3% higher than it was prior to the decline.
Understanding large and small-cap stocks
A big question I have for 2023 is whether small-cap or large-cap stocks will outperform the other at the end of the year. If you’re unfamiliar, you can further categorize stocks based on the size of the company. This is called market capitalization, which can be determined by multiplying the number of shares of a company by the share price. That gives you a value and separates large companies as those with a value of 10 billion or more and small companies with a valuation of 2 billion or less.
When you look at these two stock categories, you can see big differences in performance. The most commonly measured index for large-cap stocks is the S&P 500, and the most commonly measured index for small-cap stocks is the Russell 2000. Large-cap stocks tend to favor technology in consumer staples, whereas small-cap stocks tend to be weighted more toward healthcare, financials, and industrials. So which one will win in 2023? Listen to this episode for my prediction on this and other areas of the market!