Every month, Blackrock publishes their Student of the Market data guide. We’ve compiled some slides that point to an up year for stocks and bonds in 2023. This data is freely accessible here.
Reasons for optimism
Stocks are more than one year into an ongoing bear market. Bear markets tend to be brief but painful, before giving way to long-lasting bull markets. To reap the full benefits of the bull, investors must deal with the short-term consequences of the bear.
Last year was a down year for stocks, the 26th since 1926. Stocks tend to bounce back following a down year, averaging a 13% return.
One positive catalyst that could help markets this year is the end of the Federal Reserve’s interest rate hiking campaign. The Fed is expected to hike rates for the last time this cycle in the first half of this year. Stocks and bonds have both done very well in the year that follows the Fed’s last hike.
While last year was a down year, stocks bounced big in October-November. Historically, such strong 2-month performance has been followed by more gains one year later.
2022 was the worst year for bonds on record since 1926. History suggests 2023 can see bond returns bounce back.
Thanks to the poor returns in 2022, investors pulled more money from bond funds than they ever have. The good news? Returns are overwhelmingly positive in the year after investors yank money from the funds.
We encourage our readers to leverage the free insights available from Blackrock’s student of the market series and J.P. Morgan’s Guide to the Markets. 2022 was rough, but the data suggests 2023 could be much better. Don’t let outside noise or media doom and gloom distract you from your long term investment strategy.