Welcome to the first Runnymede newsletter of 2023! Everyone is ready to turn the page on last year's bear market and head into the new year with bushy tailed optimism.
One optimistic fact going around social media is that the stock market rarely has consecutive down years so 2023 is going to be a smashingly great year. While it is true that the market hasn't had many consecutive down years, the S&P has posted back-to-back negative years on 4 previous occasions: 1929-1933 (Great Depression), 1939-1941 (World War II), 1973-1974, and 2000-2002. Those were some really rough periods and 3 out of 4 had down years of 3+ years in a row.
While we look for the silver lining, a recession is the big risk for 2023 and we believe that earnings estimates are still too high and will need to be revised lower. This is going to lead to increased volatility especially in the upcoming earnings season. We are hoping that the clouds clear in the 2nd half of the year, but that seems like a career away from today.