In today’s Exponential Investor:
- Consider an ugly chart
- Consider the probabilities
- Consider when you should buy US stocks in advance of the next bull market
On 14 December last year I wrote to you asking if things today were as bad as they seem, or was it the same problems we always face just in a different wrapper?
If you missed that essay, I suggest you revisit it here.
I’m of the view that things don’t actually change all that much decade to decade, at least not in terms of the things we (and I will admit to a massive generalisation there) worry about.
Coincidentally a friend of mine tends to share a similar world view, which is perhaps why we’ve remained friends for 20 years while living on two sides of the planet.
And, during the holiday period, he sent me an interesting link to an article on Zero Hedge, which was also reasoning that perhaps we’re making the same arguments decade after decade and that the truth is that not much really changes.
You can find that Zero Hedge piece right here.
This all got me thinking over the Christmas and New Year break – is there any statistical data that I could call on to figure out just how bad 2022 actually was… or wasn’t?
And thankfully a handy little chart popped into one of my Signal groups just last week to (somewhat) disprove my theory…
How bad was 2022?
That chart is shown below. It shows us, in terms of how the US stock and bond markets performed, just how bad 2022 actually was.

Source: Financial Times
The outcomes for 2002 are shown near the bottom left-hand corner. You can see that the year was an absolute shocker looking at total nominal returns in US stocks and bonds.
Therefore, at least from a market perspective, 2022 was quite bad.
Now, when I was at school in the late 1990s, I was a pretty good student. And when it came to mathematics, I had a particular love for probability and statistics.
In fact, my maths teacher at the time even wrote in one of my reports that if it wasn’t for probability and statistics, I’d probably be wasting my time in his class…
Anyway, even the most basic understanding of probability and statistics can be applied to the data you see in the chart above.
What it kindly does for us is isolate the years in which both US bonds and US stocks were in the negative.
That would include 1941 (the early parts of World War II), 1969 (the beginning of a recession in the United States that would last until December 1970), 1987 (Black Monday in global stock markets) and then, of course, last year.
What really matters is that there is no instance since 1871 where there were two consecutive years in which both US stocks and US bonds delivered negative returns.
I think it stands to reason that 2023 is not going to be any different to the last 150 years for which we have the data here.
While we may find that one of the asset classes has another down year, the probability that both will is extremely low. In fact, I would argue that this outcome is nearly impossible.
What does this all mean for you?
This time isn’t different
Well, I think that the answer is simple.
It means that a diversified portfolio is paramount to a healthy wealth creation strategy. It means that 2022 was not a “new normal” but in fact a wild outlier, an anomaly in the global market.
And I know people will tell me that “this time it’s different” and that we’ve just had a 14-year bull market. But it should be noted that in 2015 and 2018 the S&P 500 (as a guide to the wider “market”) both had negative years, and 2011 was flat. The trend was upwards, but there were a few downwards lurches on the way.
Also, from 1982 to 1999 the S&P 500 had 16 years in the positive and just two negative years. So to say that this bull market was somehow unique is also incorrect.
The easy thing this year would be to assume that it’s going to be as difficult in the stock market as it was in 2022. It’s a fair position to take but, I believe, a wrong one.
I believe that a hint of what is to come can be found in the US stock market and the brutal sell-off of 1999-2000. This was the end of the boom in technology, media and telecommunications (TMT, sometime called the dotcom) stocks.
The lesson of the great bursting of the dotcom bubble of 23 years ago is that there may be more stock price declines to come in the first part of this year as the market continues to adjust itself back to fundamentals.
While interest rates are likely to increase this year, there’s a very good chance later in 2023 that central banks stop tightening monetary policy. In fact, it is possible that central banks are lowering rates again by the end of the year.
The catalyst for the bull market
The move to (or at least towards) lower official interest rates may well be the catalyst for a new bull market in US stocks.
That bottom line is that I’m expecting that 2023 will be a year of gloom and then boom. The trick will be to find stocks (and other investments) that will weather the former and then benefit from the latter as we move from 2023 to 2024.
The time to put money in the market is not in six months, or ten months or a year’s time, but now. In the future, early 2023 will be seen as a nadir in the fortunes of the US stock market – following an extraordinarily challenging 2022.
Until next time…

Sam Volkering
Editor, Exponential Investor