A Constructive View for 2023 for the S&P 500 Index
As we enter 2023, our view for equities is a constructive one. We are anticipating the return to a more favourable environment for equity investors with positive returns expected in the year ahead. The last twelve months have demonstrated that volatility is alive and well for both downside and upside moves (e.g. the Dow Jones Industrial Average had its 2nd best quarterly return since 1999 with its Q4 2022 gain). Given all the uncertainty related to inflation rates, U.S. Federal Reserve (Fed) interest rate policy, economic growth prospects, and geopolitical developments, we would expect volatility continue in 2023. Volatility is part of the landscape for equity investors and even with this reality, the annual market return has generally been favourable with approximately 75% of the past 85 calendar years showing a positive return. Notwithstanding a tough start to the decades of the 2020’s, the past 10 years has been a rewarding experience for U.S. equity investors. Whether the returns for the S&P 500 in 2023 approach the mean return level of those experienced in the last 10 years (of +13.3%)1 remains to be seen, but we believe that the odds of this occurring are favourable. Not only does the historical experience provide support for this view, but the fundamental pieces also seem to be falling into place for a constructive outlook.
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Publication date: December 29, 2022