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- The S&P 500 is down roughly 20% in 2022, and history says 2023 losses could be worse unless a rebound takes shape.
- The index rarely sees consecutive losing years, but when that does happen, the second year is worse than the first.
- The S&P 500 has only seen back-to-back down years on four occasions.
It’s extremely rare for the S&P 500 to post back-to-back losing years — but when it does happen, history says the second year is more painful than the first.
The benchmark index has fallen roughly 20% this year. Should stocks fail to rebound, investors may be in for a brutal 2023. In consecutive losing years, second-year slides have always been deeper than the first, according to historical data compiled by Bloomberg, with the average decline clocking in at 24%.
Dating back to 1928, this has happened four times: The Great Depression, World War II, the 1970s oil crisis, and during the dot-com bubble in the early 2000s.
Twice, the S&P 500 has dropped for three consecutive years, including the dot-com crash and also between 1939 to 1941. Stocks have fallen for four straight years only once, at the start of the Great Depression.
Wall Street strategists have warned that stock performance in 2023 will be mixed as the economy teeters on a recession and the Fed continues its battle against historic inflation.
Out of 11 US banks recently surveyed by Insider, less than half see stocks rising in 2023 from current levels. Four, including Morgan Stanley and UBS, expect stocks to go lower. Together, the firms had year-end price outlooks for the S&P 500 ranging from 4,500, about a 12.5% gain from current levels, to 3,400, which represents a 15% loss.
“History shows that growth and earnings continue to deteriorate into market troughs before financial conditions ease materially,” UBS wrote in a note on its 2023 outlook.