The MSCI World index of large and mid-cap stocks finished the year down a staggering 20%, indicating that the global stock market has had a challenging year. Since the 2008 financial crisis, when it dropped 40.1%, this is the index's biggest one-year loss.
However, investors who look ahead to 2023 may find some reason for optimism. The MSCI World index has been up an average of 18.4% in the year following a negative one 75% of the time, according to CNBC Pro's analysis of data since 1970. This pattern has continued for the S&P 500 as well. The large-cap index in the United States has a positive return 65% of the time the year after a bad one, with an average increase of 23.7 percent.
However, the first quarter following a year of negative returns has been less predictable, with the S&P 500 declining 55% of the time and the MSCI World index rising 53.3% of the time by an average of 11%. Also, January has had mixed results, with the S&P 500 rising 613.3% of the time and the MSCI World index rising 60% of the time by an average of 4.6 percent.
It is important to remember that past performance is not necessarily indicative of future returns, and the MSCI World index has only fallen for two or more years in a row twice: the aftermath of the Bretton Woods system's collapse in 1973–74 and the dot.com crash in 2000–2002.
The S&P 500 will fall to 3,600 points from its current level of around 3,800 points in the first quarter of 2023, despite this optimistic outlook, according to Goldman Sachs. In the subsequent six months, the investment bank anticipates that the index will rise to 3,900.
While what's in store is consistently questionable, obviously, financial exchanges tend to return following a troublesome year. Hopefully, investors will experience some much-needed relief in 2023.
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