Will the Stock Market Recover in 2023?

[00:00:00] Eric Brotman: Welcome to Don’t Retire… graduate!: The podcast that asks you what you want to be when you grow up so you can graduate into retirement with purpose and passion. I’m your host and valedictorian, Eric Brotman. Welcome to Office Hours where we answer listeners questions about personal finance, retirement readiness, and more.

[00:00:20] Eric Brotman: We received a question from Logan who asked, “will the stock market recover in 2023?” and Logan first, what I’ll tell you is if I knew that for sure. I would be on a beach with an umbrella in my drink somewhere. None of us really know exactly what’s gonna happen or when recoveries are going to occur.

[00:00:37] Eric Brotman: So let’s put the current market scenario in context historically, because the stock market in 2022, at least to date, has not been as terrible, for example, as the market in 2008 it hasn’t been hit as hard as the, the markets after Y2K. And quite frankly it’s not been the worst year by any stretch for equity markets.

[00:00:59] Eric Brotman: [00:01:00] However, this year is interesting because it is the first time since 1931 that equities, meaning stocks and bonds are down this much at the same time. Stocks and bonds normally have some type of yin and yang effect, some type where one tends to be favored when the other’s out of favor. But four times in the last century, they’ve both been down together.

[00:01:24] Eric Brotman: Twice it was not a big deal. They were small corrections, but twice they’ve been quite big. 1931 and 2022. So what happens after a correction like that? Well, eventually, eventually the pendulum will swing between greed and fear. And what I mean by that is there tends to be a selloff in equities when prices are dropping.

[00:01:46] Eric Brotman: And usually the people who are selling them off are the people who either are in over their heads and shouldn’t have been invested in those stocks or folks who are psychologically unprepared for seeing their statements drop in value periodically. And it does [00:02:00] happen. It happens to everything. It happens to our homes.

[00:02:02] Eric Brotman: We just don’t get a statement for them every month. So to me this is something where the, the lemmings will jump off the cliff at the very wrong time at the very end, and that will be where the market bottoms, because eventually institutions and savvier investors will jump in and say, “now the market is cheap. I’m going to buy and I’m going to essentially prey on the folks who panic sold.” So I don’t know when that’s going to happen. You asked if it’s, if the stock market’s gonna recover in 2023. I suspect the answer is yes, but I certainly have no idea for sure. I know it will recover eventually because equities right now are priced, sort of in a reasonable range.

[00:02:43] Eric Brotman: And companies are productive. Productivity is good. Efficiencies are good. You know, the challenge has been hiring people and I don’t think that’s a permanent challenge that we have to deal with. I think that’s an ebb and flow. Inflation’s gonna play a role here in when markets recover, and, and actually I think it’s gonna have a more adverse effect on the bond [00:03:00] market than the stock market. So I think we will see some stock market recovery. It would not surprise me to see that recovery begin in 2023, but whether it begins in January or it begins in September, none of us know. So what do you do with this information? That’s not even information. It’s a I’m, it’s me surmising that at some point there will be a, a correction in the market.

[00:03:21] Eric Brotman: What I tend to think is, I tend to think that if you’re a buyer and you are adding to your accounts every month or every paycheck and you’re a a person who’s still accumulating wealth, you ought to not change anything. In fact, if anything, you might wanna push on the pedal a little bit harder in terms of how much you’re putting away because this is an opportunity.

[00:03:40] Eric Brotman: If you’re a holder, meaning you’re maybe five years to retirement and you’re contemplating when you’re gonna have to begin withdrawals and you’re just sort of holding on, this is a gonna be a frustrating time. I mean, anytime markets are down double digits, it’s no fun. But when it’s down double digits and you’re contemplating when you’re gonna begin using it, [00:04:00] that can be a scary phenomenon and so folks in that situation might wind up delaying their retirement, or I dare say their graduation, for a year or two. If they’re physically able to do so, in order to not pull the trigger on that retirement at exactly the wrong time. You don’t really want to start withdrawals in a market that’s low.

[00:04:19] Eric Brotman: Now if you’re already a seller, you’re retired, you’re financially independent, and you’re pulling outta your portfolio on an annual basis one way or another. That just means that at all times you should have some assets that do not take on the risk of the stock market or even the bond market. You have some cash, some cash equivalents, some short-term, short enough term bonds that you can hold them to maturity.

[00:04:40] Eric Brotman: If you’ve done that and you did that over the past couple of years, this market fluctuation should be a non-issue for you because you can continue to utilize those as planned and the accounts that you have that are segregated for growth, you can leave alone. The the dangerous thing is when you’re withdrawing from an account that’s down, it’s like, it’s [00:05:00] like chopping the branches off of your orchard trees.

[00:05:03] Eric Brotman: You want to pick as much fruit as you can every year, but once you start chopping branches off, you run the risk of not having as much fruit in in future time. So Logan, I hope I answered your question. The answer is of course, I have no idea whether the stock market will recover in 2023. I think it may, but I also know that at some point it will.

[00:05:22] Eric Brotman: And whether that’s ’23 or ’24, stick to the plan. Try not to make emotional decisions, and I believe you’ll come out exactly where you need to be at the end. So I thank you for your question, Logan, it was a terrific one. If you’d like to send us a question, which we might answer in a future episode of Office Hours, post it on our Facebook page, or tweet us @brotmanplanning.

[00:05:42] Eric Brotman: I’d like to thank all of you for listening and watching today. We’d love to hear from you, so please send us a message or leave us comments at dontretiregraduate.com or on social media or leave ratings and reviews on your favorite podcast platform. If you enjoy our show, share it with your friends and family so they can join you on our journey to financial freedom.

[00:05:59] Eric Brotman: I thank you for [00:06:00] coming to Office Hours. Be sure to tune in next Thursday for new content. For now, this is your host, Eric Brotman, reminding you don’t retire, graduate.

[00:06:16] Narrator: Securities offered through Kestra Investment Services, llc. Kestra IS member FINRA, S I P C. Investment Advisory Services offered through Kestra Advisory Services, llc. Kestra AS, an affiliate of Kestra IS. Kestra IS or Kestra AS are not affiliated with Brotman Financial or any other entity discussed.