Up 4% in 2023, Is It Safe to Invest in the S&P 500 Right Now? | The Motley Fool (2024)

FAQs

Is it a good time to buy S&P 500 2023? ›

We do not think now is a good time to invest heavily in the S&P 500 if you have a short- to medium-term horizon. We underweight equities in our broader Asset Allocation framework because inflation is still high, and we do not think the Federal Reserve has finished hiking despite market expectations of cuts in 2023.

Analysts are forecasting full-year profit growth for 2023 of just 1.2%. At the same time, the S&P 500's forward 12-month price-to-earnings ratio is now at 19 compared with 17 at the end of 2022 and a long-term average of about 16, according to Refinitiv data.

Synopsis. Goldman's chief U.S. equity strategist David Kostin said in a note to clients the firm's 2023 earnings per share forecast for the S&P 500 of $224 remains unchanged and assumes a soft landing for the U.S. economy, as the economics team projects only a 25% probability of a recession over the next 12 months.

"In the first half of 2023, the S&P 500 is expected to re-test the lows of 2022, but a pivot from the Federal Reserve could drive an asset recovery later in the year, pushing the S&P 500 to 4,200 by year-end," the investment bank said in a research note.

The big picture: The S&P 500 is up 8.9% so far in 2023, or 9.7% including dividends. But the lion's share of that increase is due to the surging prices of a few of the largest companies.

Index funds are generally considered safe because they don't rely too much on the performance of any individual stock, and they also don't rely on the competence of investment managers as actively managed mutual funds or hedge funds do.

Currently, the consensus estimate is for an 8% contraction in the growth rate, followed by a 6% contraction in the second quarter. For calendar-year 2023, the consensus earnings estimate is for a 2% contraction. But that estimate is still coming down, and based on historical patterns, could continue to do so.

One of Wall Street's most vocal bears expects the stock market to fully recover its losses and trade to record highs in 2024. "This is not the end of the world.

S&P 500 10 Years Forecast (Until 2032)

In terms of a price target, Bank of America is targeting S&P 500 5,150 to 8,700 with its S&P 500 price forecast for 2030, but it is worth noting that some others are calling for a move as high as 10,000 by the time we get to 2032.

What markets will boom in 2023? ›

Key Points. The S&P 500 has fallen by 19.4% or more only seven times going back to 1923. The index has usually bounced back significantly in the past after a big sell-off. One important takeaway for investors is that the stock market goes up more over time than it goes down.

You probably want to hang it up around the age of 70, if not before. That's not only because, by that age, you are aiming to conserve what you've got more than you are aiming to make more, so you're probably moving more money into bonds, or an immediate lifetime annuity.

On average, S&P 500 earnings decline 16.4% in recession.

The average stock market return is about 10% per year, as measured by the S&P 500 index. In some years, the market returns more than that, and in other years, it returns less. The S&P 500 index comprises about 500 of America's largest publicly traded companies and is a benchmark for annual returns.

2023 is a great time to start investing. But so was 2022. The key point is that over the long term, investments generally do grow in value, even if there is some early volatility. It is far better to invest now, whenever now happens to be, rather than waiting for some ideal future opportunity.

History shows us that investing in an S&P 500 index fund -- a fund that tracks the S&P 500's performance as closely as possible -- is remarkably safe, regardless of timing. The S&P 500 has never produced a loss over a 20-year holding period.

Will shares recover in 2023? ›

After ending the year down nearly 20%, the S&P 500 index is in the green for 2023. And the Nasdaq Composite — which plunged 33% in 2022 — is up more than 4.5% this year. So when will stocks fully recover from the bear market? Many experts appear optimistic it will happen in 2023.

“The bear [market] is almost over, and a new exciting bull market awaits in the second half of 2023,” he said, pointing to potential in technology stocks in particular.

Based on the latest S&P 500 monthly data, the market is overvalued somewhere in the range of 65% to 117%, depending on the indicator, up from last month's 60% to 110%. We've plotted the S&P regression data as an area chart type rather than a line to make the comparisons a bit easier to read.

S&P 500 6 Month Return is at 2.44%, compared to 7.68% last month and -9.52% last year. This is lower than the long term average of 3.04%.

BofA's technical research strategist Stephen Suttmeier specifically highlighted two bullish signals that suggest the S&P 500 could rise to 4,900 by March 2024, representing potential upside of 19% from Tuesday's close.

Analysts led by Michael Wilson estimated the S&P could slip to as low as 3,000 points during 2023, according to a note to clients. That indicates 24% downside from the index's 3,930 mark as of Monday and would be the S&P's lowest mark since May 2020.

S&P 500 3 Year Return is at 37.30%, compared to 43.16% last month and 50.15% last year. This is higher than the long term average of 22.95%. The S&P 500 3 Year Return is the investment return received for a 3 year period, excluding dividends, when holding the S&P 500 index.

How long has it historically taken a stock investment to double? NYU business professor Aswath Damodaran has done the math. According to his math, since 1949 S&P 500 investments have doubled ten times, or an average of about seven years each time.

Wilson's base case assumes S&P 500 EPS climb to $250 in 2025, which would be a record. But his target continues to put him at the bearish end of Wall Street. According to JPMorgan, the consensus currently forecasts EPS of $275 in 2025.

What are the safest stocks to buy in 2023? ›

For the rest of 2023, investors should consider some safe stock winners like Walmart (NYSE:WMT), Home Depot (NYSE:HD) and O'Reilly Automotive (NASDAQ:ORLY). Today, these stocks still have substantial competitive advantages and unique business characteristics likely to support outperformance in this cycle.

5% or greater pullbacks occur about every 7 months. 10% or greater pullbacks occur about every 2 years.

The figures tell a remarkable story. Over the full period, just 2% of actively managed Large-Cap Core funds beat the S&P 500.

And while theoretically possible, the entire US stock market going to zero would be incredibly unlikely. It would, in fact, take a catastrophic event involving the total dissolution of the US government and economic system for this to occur.

If you're 70, you should keep 30% of your portfolio in stocks. However, with Americans living longer and longer, many financial planners are now recommending that the rule should be closer to 110 or 120 minus your age.

Seniors should consider investing their money for several reasons: Generate Income: Investing in income-generating assets, such as stocks, bonds, or real estate, can provide a steady income stream during retirement. This can be especially important for seniors who no longer receive a regular paycheck from work.

While holding or moving to cash might feel good mentally and help avoid short-term stock market volatility, it is unlikely to be wise over the long term. Once you cash out a stock that's dropped in price, you move from a paper loss to an actual loss.

The threat of a U.S. recession remains alive in 2023. The consensus estimate on the probability of a meaningful downturn in the American economy in the next 12 months is at 65%, according to Goldman Sachs Research. But our own economic analysis rates that probability much lower, at 35%.

When was the S&P 500 last recession? ›

Our last two recessions strike quite a contrast, with the S&P 500 down over 30% a year later in 2008, but up over 30% in 2009-2010. While not in the chart, two year after the start of a recession the S&P 500 Index was higher seven out of ten times, with 1973, 2001, and 2008 being the exceptions.

When things are looking bleak, consider holding on to your investments. Selling during market lows can be one of the worst things you can do for your portfolio — it locks in losses. When the market evens out down the road, rebalancing may be in order.

Basic Info. S&P 500 5 Year Return is at 54.51%, compared to 57.45% last month and 71.33% last year. This is higher than the long term average of 44.37%. The S&P 500 5 Year Return is the investment return received for a 5 year period, excluding dividends, when holding the S&P 500 index.

Basic Info. S&P 500 10 Year Return is at 156.3%, compared to 161.0% last month and 215.4% last year. This is higher than the long term average of 112.6%.

The same $10,000 invested in the S&P 500 would be worth just $7,520 now.

Because the S&P 500 itself has always recovered from recessions in the past, it's far more likely to rebound from future downturns as well. If you're looking for a safe investment that's all but guaranteed to pull through periods of volatility, you can't beat an S&P 500 ETF.

Advanced economies are expected to see an especially pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023. In a plausible alternative scenario with further financial sector stress, global growth declines to about 2.5 percent in 2023 with advanced economy growth falling below 1 percent.

Basic Info. S&P 500 10 Year Return is at 156.3%, compared to 161.0% last month and 215.4% last year. This is higher than the long term average of 112.6%.

What is the S&P 500 average return every year? ›

Basic Info. S&P 500 1 Year Return is at 1.15%, compared to 0.91% last month and -1.71% last year. This is lower than the long term average of 6.29%. The S&P 500 1 Year Return is the investment return received for a 1 year period, excluding dividends, when holding the S&P 500 index.

Whether you're nervous about market volatility or simply want an investment you can count on to keep your money safe, an S&P 500 ETF or index fund is a fantastic choice. This type of investment tracks the S&P 500 itself, meaning it includes the same stocks as the index and aims to mirror its performance.

Investors typically flock to fixed-income investments (such as bonds) or dividend-yielding investments (such as dividend stocks) during recessions because they offer routine cash payments.