Despite Volatile Markets, 2023 Brought Bright Spots for Investors, Too
James Zahansky, AWMA®
Principal/Managing Partner, Investment Advisor & Chief Goals Strategist
With 2023 quickly coming to a close, we all tend to look back in the rearview at the year that just was and think about the highlights (and lowlights). For investors, it’s certainly been a wild ride. But stock investors tend to be an optimistic lot, looking on the bright side of life and willing to invest for the long term. So, let’s consider some additional things the markets have given us to appreciate this holiday season.
While it’s true that the S&P 500 fell 10.3% from July 31 to October 27, prompting some understandable handwringing from investors, it’s important to remember the bigger picture: The S&P 500 is up 13.5% this year through November 3. That result is almost twice the index’s long-term average and another reason to give thanks this season.
Many stocks & sectors have rallied.
The stock market may have hit a rough patch during the historically tough months of September and October, but many sectors of the S&P 500 have risen–sometimes by substantial amounts—if you look at returns over the full year.
The S&P 500 Communications Sector, which includes stocks like Meta Platforms (Facebook’s parent) and Alphabet (Google’s parent), has risen 42.4% from January 1 through November 3. The S&P 500 Information Technology sector, which is home to semiconductor stocks and software stocks, like Microsoft and Adobe, has gained 40.4% over the same period. And the S&P 500 Consumer Discretionary sector jumped by 26.2%, helped by Amazon, Tesla, and homebuilders’ stocks.
Some individual stocks have also had a truly spectacular year, even though they may have given back some of their gains in recent months. Nvidia, Meta Platforms, Palo Alto Networks, Royal Caribbean Cruises, and Tesla are among the top performing stocks in 2023, gaining anywhere from 75% to more than 200%! Nvidia shares have jumped because the company is at the forefront of producing semiconductors needed to process artificial intelligence programs. Proving, once again, that in good times and in bad, US companies have always continued to innovate.
Each of these stocks are included in your portfolio today, and these fluctuations in returns are a good reminder of why we keep your portfolios diversified.
Investing for the long run.
Stock declines have always received lots of news coverage from traditional media outlets like newspapers and television, but now news about the markets is amplified on social media platforms. When the markets fall sharply there are always tweets on X and posts on Instagram and Facebook that appear 24-hours a day on our computers, phones, and watches.
What’s lost amid all the negativity is that over the long run, stocks go up far more than they go down. During the average bull market, the S&P 500 gains an average of 265% over 67 months, while in the average bear market, stocks fall by 33% over 12 months, according to research by Capital Group. Investors willing to hold on through bear markets have historically been rewarded: After the 18 biggest market declines since the Great Depression the S&P 500 was higher five years later with annual returns of more than 18%.
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Trying to time the market is tough.
If the market’s volatility has you on edge, remember that timing the market may be even tougher than investing for the long run. When you time the market, you need to make two good decisions to be successful. First, you need to exit the market when it’s high and about to fall, and then you need to jump back in when the market has bottomed and is about to rise.
Investors who exit the market but don’t get back in at the right time, might find they’re sitting on the sidelines as the recovery passes them by. Consider the investor who places $10,000 in the S&P 500 index from July 1, 2013 through June 30, 2023. The investor would live through two bear markets during the decade, but in the end, the portfolio’s value would nearly triple to $27,248, Capital Group reports.
If the investor timed the market and was sitting on the sidelines during the market’s 10 best days, the portfolio’s returns would shrink to only $14,922. If the investor missed the best 20 days, the portfolio would only appreciate to $10,838. Moreover, if that investor missed the market’s best 30 days or 40 days, the portfolio’s value would decline to $8,347 and $6,553, respectively.
Over the coming holidays, instead of getting a rise out of family members talking about politics, turn your focus to longer-term thinking. Remind them that with innovation, capital markets will continue to improve over the long-term, even during times of war and economic upheaval. The endurance of the US stock markets is something for which we can all be thankful.
At Weiss, Hale & Zahansky Strategic Financial Advisors, we help our clients to both leverage and maintain this crucial long-term approach through our Plan Well, Invest Well, Live Well™ strategic process and an ongoing, proactive approach to partnering with them to help them achieve their goals. If you’d like to start off 2024 with a strong financial plan and strategic long-term financial strategy of your own, contact us for a complimentary consultation by calling (860) 928-2341, or request one on our website.
Authored by Principal/Managing Partner James Zahansky, AWMA®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084. 860-928-2341. www.whzwealth.com.
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