2023 Market Outlook

What should you expect from the global markets in 2023? Will we go into a recession, will the dollar continue its bull run, or will we see a year worse than 2022? Fortunately, almost all economic reports are hopeful that 2023 will be a good year – although with a few bumps and bruises. Some even go as far as predicting falling inflation, a Fed interest rate pivot, a soft economic landing, and stronger consumer spending. The hope is that we don’t see a repeat of 2022. 

Market performance last year had a big impact on most investors’ portfolios, so it makes sense that a lot of investors, especially retirees, are a little cautious this year. That said, for this year, just hold on. Hedge and pivot your portfolio to ride out the chaos that could come but never lose calm.

The Presidential Election Cycle Theory

The Presidential Election Cycle Theory is a theory built on the belief that the stock market performs differently depending on which year of the presidential election cycle it is in. According to the theory, year one after an election is typically the worst for the stock market. Year two is a little better, and the third year is the best. The year before an election is usually positive due to the Federal Reserve’s monetary policy and investor sentiment. 

If this theory is anything to go by, then 2023 might be a great year for investors. In fact, as Adrian points out, since 1927, the S&P 500 has always been positive the year before a presidential election. The year during the great recession is the only year where this trend failed to materialize. However, it is important to note that this is a theory and not a universally accepted fact, and that the stock market’s performance can be affected by various factors.

Links and Resources:

Morgan Stanley Investment Outlook 2023

Barron’s 12 Best Income Investments for the New Year
Blackrocks 2023 Global Outlook: A new investment playbook