Up 4% in 2023, Is It Safe to Invest in the Stock Market Right Now?

Quite frankly, investors got spoiled. From 2009 through 2020, we enjoyed the longest bull market in history. Sure, COVID-19 caused a steep sell-off. But stocks quickly rebounded. More retail investors began buying stocks than ever before.

Then the bottom fell out. The S&P 500 did something it’s done only seven times since the index has existed by plunging 19.4%. Reality set in that the stock market doesn’t always go up.

But it’s also important to recognize that stocks go up more often than they go down. The S&P 500 is up 4% so far in 2023. Is it safe to invest in the stock market right now?

Image source: Getty Images.

Reasons to jump in

Let’s start with some good news. There are several reasons to jump back into the stock market.

For one thing, history is on your side. In the six previous years that the S&P fell by 19.4% or more, the index bounced back in the next year. The two outlier periods occurred during the Great Depression. Even better, the S&P roared back by 23.5% or more in all of the other cases.

Another reason to buy stocks right now is that valuations are more attractive than they’ve been in a while. And the list of bargains includes some top-tier stocks that have been huge winners in the past. Amazon (AMZN 2.99%), for example, is close to 50% below its previous high. The company still has solid long-term growth prospects, though. 

There are also encouraging signs that inflation is slowing. The latest U.S. Bureau of Labor Statistics data showed that the consumer price index (CPI) fell the most on a month-to-month basis in December than it has since April 2020.

Soaring inflation ranked as one of the biggest causes of the S&P 500’s decline in 2022. It was definitely a significant factor behind Amazon’s slump. In the company’s latest quarterly update, CFO Brian Olsavsky said that “broad-scale inflation, heightened fuel prices and rising energy costs have impacted our sales growth.” If inflation continues to fall in the coming months, it’s likely that the S&P 500, Amazon, and…

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