Why 2023 Has A Decent Chance of Being Good for the Stock Mkt

[Recyclersteve]

Here is something potentially quite positive for stocks in 2023...

WHEN THE FIRST FIVE DAYS OF THE YEAR (THRU NEXT MONDAY, NOT THRU THIS FRIDAY) HAVE BEEN UP 1.2% OR MORE FOR THE S&P500, then there is an overwhelming chance the markets will finish the year positive. The source of my data is the Stock Trader's Almanac for 2023 (pg. 16) and I am pointing out something that they didn't mention in this detail in the book.

So, if the markets were up 1.2% or more in the first five trading days of the new year, then (over the 73-year period from 1950 to 2022) the market finished positive a whopping 25 times and down only 2 times! Also, 22 of the 25 up years were gains of 12.3% or more. Furthermore, 14 of the gains ranged from 18.9% to 38.1%, truly very nice performance for many.

WHEN THE FIRST FIVE DAYS OF THE YEAR WERE UP BY ANY AMOUNT, then the S&P finished the year up 39 times and down only 8.

WHEN THE FIRST FIVE DAYS OF THE YEAR WERE NEGATIVE, the S&P500 finished the year up 14 times and down 12. So it was still up 53.8% of the time, even after a lousy start.

BUT WAIT THERE IS MORE. Consecutive losing years, in spite of what people may think, doesn't happen very often. Since 1950, this only happened in 1973-74 (Vietnam era) and 2000-01-02 (a 3 year pullback after a huge run in the late 1990's, huge expenses due to Y2K fortification expenses by many companies, and the dot com meltdown after stocks like Pets.com that weren't even profitable went nuts). In other words, once we had a down year, over the following year the market was up 16 times and down only 3!

By the way, the S&P being down 0.4% today is of no real consequence IMHO. The first five days combined are what I am looking at.

Disclaimers: Obviously, the media can be very biased. I try to stick to facts as best as possible. Keep in mind that the market could go down, say, 20% in the first part of the year before staging a big rally to finish the year positively. Therefore, staging your way into positions of real companies that are profitable gives you a better chance (generally) than going all in without having the resources to withstand a pullback. I'm not making any comments on crypto- not a fan of something that is virtual. I am NOT a cheerleader for the bulls by any means. For instance, I currently have a short position in Southwest Airlines (LUV) where I am betting on the company's stock price to go down over the next month or so.

[Recyclersteve]

One of my close friends mentioned another interesting tidbit, the pre-presidential election years.

Most bear markets occur in years 1-2 of the presidential cycle. Then, in year 3 (this year) administrations do what they can to goose the economy so people are in a good mood when elections roll around.

There have been only 2 losing 3rd years since 1940. Both of them were modest with the S&P going down 0.7% in 2015 (Obama) and a tiny 0.003% in 2011 (Obama).

That’s 20 cycles without more than a hiccup.

In fairness, I should point out that there was a 5.5% loss in 1939 (Roosevelt) and a massive 47.1% loss in 1931 (Hoover) during the Great Depression.

This data is also from the Stock Trader’s Almanac (pg. 28).

The book is full of stats and probabilities for those who follow the markets. At a cost of just $50, one good trade can easily cover the cost of the book. For more info those who are interested can go to stocktradersalmanac.com. There is also a Commodity Trader's Almanac with info on trading everything from gold and silver to heating oil and soybeans. It will be available mid-year. Back issues can likely be bought elsewhere online. I've got a few buried in my office that are NOT for sale at any price.

[Recyclersteve]

First I want to assure everyone that I absolutely positively didn't modify my original posting in this thread to make it look any better than it was.

Read that posting and it is pretty clear that I was hoping for a gain of at least 1.2% for the most rosy scenario for 2023. Well, Monday was Day 5 and how is this for awesome results? I was hoping for a 1.2% or better gain. I didn't want something way above 1.2% because a higher gain would make the recent move seem like too much and that everyone would be thinking we'd be in dire need of a quick, sharp pullback.

The actual gain was 1.36%, only slightly more than what I hoped for. I am super pleased with this start to the year and heard a recording online from a guy named Mo Ansari who has a 4-day indicator he uses. He too was very pleased with his indicator and how it performed.

Now, just to show an abundance of caution, this DOESN'T AT ALL mean we are out of the woods and the markets are going to rock from here. I fully expect more of a pullback as the Feds increase interest rates, companies announce layoffs, and, Bed Bath & Beyond likely declares bankruptcy. But I will reiterate that I expect the S&P 500 to finish the year up 12% or more.

You want even more evidence? I have data going back to 1950 based on the S&P 500.

There were 27 times when the market was up 1.2% or more in the first 5 trading days of the new year. Of those, a whopping 25 finished the year positive. Here are the percentage gains in order from best to worst...

ALL THESE 22 YEARS WERE ABOVE TO WELL ABOVE MY TARGETED 12% GAIN:
38.1% in 1958
31.5% in 1975
29.6% in 2013
28.9% in 2019
27.3% in 1989
26.9% in 2021
26.4% in 2003
23.1% in 1961
21.8% in 1950 (the earliest year for this data)
20.1% in 1967
19.5% in 1999
19.4% in 2017
19.1% in 1976
18.9% in 1963
17.3% in 1983
16.5% in 1951
15.6% in 1972
13.6% in 2006
13.4% in 2012
13.0% in 1964
12.8% in 2010
12.3% in 1979

ALL THESE 3 YEARS WERE BELOW MY TARGETED 12% GAIN BUT STILL POSITIVE FOR THE YEAR:
9.0% in 2004
2.0% in 1987
1.4% in 1984

THESE 2 YEARS WERE NOT PROFITABLE FOR THE YEAR IN SPITE OF A NICE START TO THE YEAR:
-6.2% in 2018
-17.4% in 1973

NOTE: I have carefully double checked the numbers above to make sure they are accurate.

Notice that the big gainer years were spread throughout each decade since the 1950's, so they weren't all in, say, just 3 decades.
So look at those numbers and tell me why a gain of 12% or more isn't a realistic expectation for 2023. I am VERY MUCH looking forward to the rest of 2023 and hoping the roller coaster ride doesn't cause too many people to lose their lunches along the way.

Please let me know if this type of info is at all good to have available. I put a lot of time into these posts because I believe in paying it forward. It is nice to get some feedback once in a while.

[68Camaro]

What's the standard disclaimer? "Past results are not indicative of future performance"

Past results had to be caused by something. Are those"something's" still in play now, or are circumstances somehow different? That is - to me - what is important. I don't recall a more financially precarious global market, or a more leveraged US position - ever.

[Cu Penny Hoarder]

What's the standard disclaimer? "Past results are not indicative of future performance"

Past results had to be caused by something. Are those"something's" still in play now, or are circumstances somehow different? That is - to me - what is important. I don't recall a more financially precarious global market, or a more leveraged US position - ever.

Bingo. Probabilities are one thing, but past performance guarantees nothing. NO ONE knows what happens next.

As for me... I have ZERO exposure to the stock market. Last time I traded was an ES short during Feb and March of 2020. I took 50% of those profits and bought physical Ag when it was $12-13. Still living off the other 50%. Covid was a gift for me. Mr. Market HATES things like that.

[Recyclersteve]

I think 2008 with mortgages collapsing and bailouts needed by several well known companies was way more precarious- worldwide. That said, every situation is different. I spoke with over 100,000 people during my almost 20 years in the biz. There was ALWAYS something (and often several somethings) to worry about. There is a tendency to exaggerate the severity of the current situation, perhaps because of the drumbeat of negativity from the media.

We all embrace risk differently. I’d be scared to death to own a money losing one product biotech stock, and I’d be scared to short it as well, yet I know a few who embrace this type of risk.

Imagine being someone who bought silver at the all-time peak of $50+ in 1980 and held. 42 years later they’d be down 50%, and, if you adjust for inflation or other investments they could’ve had, MUCH MORE!

[IdahoCopper]

28/3.

A black swan can occur. For example, it is reasonable to allow that tactical nukes may be used in Ukraine in 2023. If so, then this year will be the third time in 28 years the series was not up, but down.

Past results do not guarentee future returns.

[Recyclersteve]

I’m not looking for a guarantee and anyone who is will likely have a hard time with investments of many types for their lifetime. My dad was a great example. He took savings that my brother and I both had and bought (after a reference from a friend) a mutual fund called Manhattan Fund run by a hotshot manager named Gerald Tsai. I remember seeing something 10 years later which ranked 1,500 mutual funds and Manhattan was at 1,492 or 1,493, near dead last. We got absolutely clobbered on that investment and my dad never did anything else in the stock market after that.

I was more curious. I figured somebody was making $ if someone else was losing. My curiosity spurred me to eventually work in the industry almost 20 years and I talked to many people who taught me a lot. I am absolutely so thankful that I didn’t give up. I’ve had a few clunkers over the years, but have always come back from the adversity. I think a big piece of it is being curious and willing to work hard to find and evaluate new ideas.