AROUND THE TURN of the year, investment experts issue their forecasts for the next 12 months. Bloomberg says it has gathered more than 500 market predictions for 2023, with many forecasting a rough year for the financial markets.
I’ve done my research as well, and I’m now prepared to offer my forecast: There’s an 80% chance that the S&P 500 will return between -10% and 30% in 2023.
I can’t claim this as original work.

I’VE BEEN RETIRED for six years and—like many retirees—I rely on my portfolio’s appreciation, interest and dividends for most of my retirement income. The high inflation of 2022, coupled with poor stock and bond market returns, have me pondering what history would predict for 2023’s performance.
I decided to look at how frequently both the stock and bond markets have performed poorly in the same year, and what subsequent returns have typically been. Simultaneous declines in both the U.S.

THERE ARE MANY WAYS to gauge whether individual stocks and the overall market are expensive. But which valuation metric should you rely on?
The fact is, you can find metrics to buttress any market narrative you want to believe. Such confirmation bias can prompt investors to make big changes to their mix of stocks and more conservative investments—sometimes with disastrous results.
As a market analyst, writer and former university finance instructor, I’m familiar with a host of valuation tools.

FEELING DESPONDENT about your 2022 investment returns? Yes, it’s been a grueling year for almost all stock and bond investors. But some folks have been hit far harder than others.
In the bounce back from 2020’s coronavirus market crash, near-zero-percent interest rates, coupled with consumers flush with cash, made for pockets of irrational exuberance. High-risk growth stocks—like those owned by Cathie Wood’s ARK Innovation ETF (symbol: ARKK)—captured the imaginations of Wall Street and Main Street alike.

LAST WEEK MIGHT HAVE been the moment we flipped from inflation worries to recession risks. On Tuesday, November’s inflation report turned out to be cooler than economists expected. Stocks initially soared, only to sell off toward the end of the day in anticipation of Wednesday’s news. Sure enough, the next day, Federal Reserve Chair Jerome Powell delivered not only a 0.5-percentage-point interest rate increase, but also a stern message in his press conference afterward.

ARE YOU TRAVELING for the holidays? There’s good news for drivers. Average retail pump prices have dropped below $3.30 a gallon, with many states seeing prices under $3. This positive development for consumers—including those off to grandma’s house this season—comes as wholesale gasoline futures fall to their lowest level in a year.
Following Russia’s invasion of Ukraine in early 2022, and just in time for the busy U.S. summer driving season, gas prices notched all-time highs near $5 per gallon.

I HAVE CHEERY investment news: Most Wall Street strategists are bearish on stocks. Last week, Bloomberg reported that 2023’s projected change in the S&P 500 by the best and brightest forecasters is negative. That hasn’t happened since at least 1999. Consider today’s bleak consensus to be a contrarian indicator. It could set the bar low enough for a decent 2023.
If you flip on financial TV or peruse investment magazines at this time of year,

THE FTX FALLOUT IS something to behold. It’s said that the now-bankrupt cryptocurrency exchange has liabilities that could end up being twice what Enron owed when it collapsed more than two decades ago. The hubris of Sam Bankman-Fried (also known as SBF), founder of FTX, is something all investors can learn from.
It was just a few months ago that Bankman-Fried was dubbed the next Warren Buffett and 2022’s version of the late 19th and early 20th century financier J.P.

I’M 34 GOING ON 74. Like an old man set in his ways, I routinely prepare my own meals and rarely go out to eat. But last week, I shook things up by scarfing down some ribs at a nearby outdoor mall. I couldn’t help but notice all of the “now hiring” signs.
It’s a far cry from when I ventured to the same mall in March and April 2020. Do you remember that feeling—the uncertainty and anxiety about what life was going to look like amid the height of the pandemic?

I DON’T ENVY THE FOLKS in Washington. Last year, many accused Federal Reserve policymakers of being asleep at the wheel as they downplayed the risk of rising inflation. This year, of course, it’s been the opposite: The Fed has been in overdrive, raising interest rates aggressively. So far, the Fed has pushed through six increases in a row, totaling 3.75 percentage points. Many are now criticizing the Fed for moving too quickly.
This is in contrast to the challenge the Fed had been dealing with before COVID.

LAST WEEK’S INFLATION report did the bulls no favors. The latest reading on the Consumer Price Index showed a larger-than-expected September rise, mostly due to housing data, which tend to respond slowly to higher interest rates. Then came Friday’s University of Michigan Consumer Sentiment Survey, which showed an unexpected jump in inflation expectations over the next year and next five years. Result: Bond yields climbed and stocks finished the week lower.
But there’s also good news: Among economists,

IF YOU’RE AN OWNER of financial assets, inflation doesn’t offer much reason to cheer. Lost 16% on your bonds this year? Once you factor in inflation, the hit to your bond portfolio’s real, inflation-adjusted value would be more than 20%.
By contrast, if you’re a borrower, inflation is a bonanza. Suppose you owe $2,000 every month to the mortgage company on your fixed-rate loan. As inflation climbs, your mortgage payment stays the same—but, if your income rises with inflation,

THERE’S AN INVESTOR sentiment chart that gets dusted off and passed around after long periods of market malaise. Using the chart, active investors aim to identify when people have given up on stocks, so they can buy shares at the point of maximum pessimism.
Looking back, it appears that late 2021 marked the chart’s “euphoria” phase, and we’ve since been descending through the stages that follow—anxiety, denial, fear and so on. Which phase are we currently in?

I RECENTLY LISTENED to author JL Collins on the Bogleheads Live podcast. Collins mentioned several times that stock declines never last. He isn’t alone in this assertion. You can read any number of books or articles that talk about the need to remain invested during stock market downturns because the market always recovers.
Perhaps it’s my training as an engineer. We’re taught to think about failure rates and probabilities of failure—which brings me to an uncomfortable notion: Just because the U.S.

WHAT DO ALL BEAR markets have in common? By definition, stock prices must fall at least 20%. But often, that’s pretty much where the similarity ends.
For instance, ponder the differences between 2020’s one-month, 34% plunge in the S&P 500 and this year’s grinding nine-month descent, which saw the S&P 500 yesterday close 25% below its early January high.
The 2020 slump had folks fretting about the economic shutdown and possible deflation, while this year’s big worry is surging inflation amid a 53-year low in unemployment.