Last year marked one of the most challenging periods for financial markets since 1931, leaving countless investors anxious about what the future held. As we entered 2023, the predictions offered little comfort, adding to the uncertainty that hung in the air.

But here’s the thing about major market downturns – they can often surprise us with massive gains. A look at the historical data for US Stocks dating back to 1950, reveals that buying after significant declines has often been rewarding.

The stock market’s resilience in the face of uncertainty is evident this year. Not a single one of the 16 largest firms on Wall Street forecasted the S&P 500 to reach 4550 by year-end. Yet, astonishingly, it has already surpassed this mark, achieving it just a little over halfway through the year.

The point of this is to prove how difficult it is to make predictions on the stock market. When stocks fall our emotions make us think it will fall further. The market will constantly tempt you to make changes to your investment strategy, potentially leading to poor decisions. 

This is why I strongly advocate for having a solid investment plan that you can stick to in a wide array of market and economic conditions. Always bear in mind that long-term gains are frequently accompanied by temporary declines. 

Your ability to maintain focus on the bigger picture is what counts. With a well-crafted investment plan that aligns with your goals and risk tolerance, you can navigate the uncertainties and fluctuations of the market with greater confidence.

George Maroudas, CFP®

George Maroudas, CFP®

Twitter @ChicagoAdvisor

Disclaimer / Sources:

Most challenging period for financial markets based on the yearly performance of a 60/40 portfolio of US stocks / bonds. Data from YCharts. 

U.S. stocks after declining 25% or more from George Maroudas (@ChicagoAdvisor) . Data from YCharts as of 6/22/23.

Wall Street Firms year end price target from ChicagoAdvisor

US stock growth and declines from ChicagoAdvisor. Data from YCharts

To read more on stock market concentration, check out my blog post here.

Stock investing includes risks, including fluctuating prices and loss or principal. This information is not intended to provide specific advice or recommendations about any stock nor is it intended to be a recommendation to buy, sell or hold any stock investment. We suggest speaking with your financial professional about your situation prior to investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice.