Financial Planning Fridays #35: Two More Reasons to be Optimistic in 2023

At the start of this year, we gave you three great reasons to be optimistic about the market in 2023. And so far, we have been right. We had a great first quarter.

As we begin the second quarter of 2023, we have two more reasons for you to remain optimistic for the remainder of this year.

This chart shows every year since 1950 where the S&P 500 had a return of seven percent or greater in the first quarter of the year. This year is the 20th time this has happened. In each of those instances, the S&P 500 has then gone on to have a positive year with an average return of 25.7% and a median return of 26.9%! That’s pretty incredible.

The second reason to continue to be optimistic is that the market has historically done exceptionally well after the Federal Reserve finishes a rate increase cycle. The Federal Reserve has consistently raised rates for the past 15 months but is now very close to their year-end target. Many already believe that rates are now high enough to meet the Federal Reserve’s goals.

In this chart, we see the performance of the S&P 500 for the 12 months following the last rate hike in a cycle since 1994. The average return has been 18.3% in the 12 months afterwards and was positive three out of four times!

While we remain optimistic for the rest of 2023, that does not mean we will become complacent. As a reminder, on average, the market experiences one 10% drop every single year, even the years where it is up significantly. For this reason, we will continue to be ready for anything that comes up in the market, and the world, and ensure that our clients are well positioned to take
advantage of any short-term volatility.

Be on the lookout for our next Financial Planning Fridays episode. Subscribe to our Youtube Channel so you never miss an episode. Or contact us directly; schedule your 15-minute call with us today.