The S&P 500 ended 2022 down 20% as the stock market logged its worst annual performance since 2008, according to CNBC. Analysts predict that this market turmoil could bleed over into 2023 and perhaps beyond, creating a “lost decade” for portfolios.
Stock markets saw heavy losses in 2022.
When markets closed on December 30, 2022, the S&P 500 was down 20% for the year, the Nasdaq was down 33%, and the Dow Jones Industrial Average was down 9%. This was the fourth-worst year for stocks, as measured by the S&P 500, since 1945. Only 1974, 2002, and 2008 had lower-performing years
The U.S. economy may continue to experience volatility in 2023.
On January 2, 2022, The Wall Street Journal reported, “More than two thirds of the economists at 23 large financial institutions that do business directly with the Federal Reserve are betting the U.S. will have a recession in 2023.” The banks noted dwindling consumer savings, a beleaguered housing market, and banks tightening their lending standards as signs of economic turbulence on the horizon.
Economic sentiment is also down among the general public. A survey by Gallup found that 79% of Americans expect that “2023 will be full of economic difficulty.” The poll also found that 65% of people believe the “prices of goods and services will rise at a high rate,” and 81% of people believe taxes will increase in 2023.
Economic volatility may even extend into the rest of the decade
Sound Planning Group CEO David Stryzewski predicts a “lost decade” for market performance over the next 10 years. In an appearance on Fox Business on January 3, 2023, Stryzewski said, “As we look forward to the future here over the next 10 years, I think that a lost decade is very likely given the fact that we have so much [economic] pressure coming from so many different areas all at once.
Stryzewski went on to theorize that the Federal Reserve’s tight economic policies are pressuring preexisting bubbles in different markets, stating, “I believe that there is a bubble in the stock market; there’s a bubble in the bond market here today. We’ve got a real estate bubble, and that’s also hurting corporations as we look at how they are no longer able to borrow at such low-interest rates.
After a tumultuous 2022, consumers may wish to prepare for continued economic volatility in the year—or even years—to come
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