A guide to the market for 2023
2022 was a bad year for financial markets.
The good news is that bad years are usually followed by good years ⬇️
2022 was a bad year for financial markets.
The good news is that bad years are usually followed by good years ⬇️
The S&P500 now trades at a P/E of 16.7
This in line with the average P/E of the past 25 years.
As a result, you can expect equity returns that lay in line with the historical average: 7-9% per year.
This in line with the average P/E of the past 25 years.
As a result, you can expect equity returns that lay in line with the historical average: 7-9% per year.
This overview shows the relation between the forward P/E and equity returns.
The lower the forward P/E, the higher your expected return.
The lower the forward P/E, the higher your expected return.
Over the past 20 years, the average earnings of companies grew by 9.1% per year.
EPS growth was driven by the following elements:
- Margin expansion: 5.1%
- Revenue growth: 3.8%
- Share buybacks: 0.2%
EPS growth was driven by the following elements:
- Margin expansion: 5.1%
- Revenue growth: 3.8%
- Share buybacks: 0.2%
In 2022 small cap stocks and value stocks performed really well:
In the short term, stocks can be very volatile.
Despite average intra-year drops of 14%, annual returns were positive in 32 out of 42 years.
Use volatility in your advantage.
Despite average intra-year drops of 14%, annual returns were positive in 32 out of 42 years.
Use volatility in your advantage.
Real estate has become way more unaffordable due to increasing interest rates in 2022:
The best time to invest, is when consumer confidence is low.
This seems to be the case today.
This seems to be the case today.
International stocks are now trading at a large discount compared to US stocks:
Here you can find an overview of all yearly asset class returns since 2008:
2022 was one of the worst years ever for 60/40 portfolios
(Portfolios with 60% bonds and 40% equity)
(Portfolios with 60% bonds and 40% equity)
The longer you invest, the more chance you'll make money.
Since 1950, there has never been a 20-year period in which you lose money by investing in stocks:
Since 1950, there has never been a 20-year period in which you lose money by investing in stocks:
The S&P 500 returned 16.8% per year over the last decade.
However, the average stock investor only made 8.7% per year.
Why? Because investors buy and sell at exactly the wrong time.
However, the average stock investor only made 8.7% per year.
Why? Because investors buy and sell at exactly the wrong time.
If you liked this, you'll love our website.
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qualitycompounding.substack.com
▪️ Each Tuesday we share 5 investment insights
▪️ Each Thursday we publish a deeper investment article
Start your journey here:
qualitycompounding.substack.com
This thread was based on JPM's excellent Guide To The Markets (always a must read).
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