There are no guarantees when it comes to the stock market. Though the U.S. stock market usually recovers from downturns over long periods of time, it has recently experienced the longest bull market in history. This has left many experts wondering when will the stock market recover.
Read: 3 Things You Must Do When Your Savings Reach $50,000
The Stock Market Outlook for 2023: Quick Take
If you have been wondering when the stock market will recover, keep in mind that the market is cyclical. That means it goes up and down repeatedly, and at some point, the bears need to step in if there is a prolonged downswing.
For example, in the case of the 2022 bear market, the primary cause was inflation. As prices grew at dramatic rates, the Federal Reserve had to do something. It responded by increasing interest rates. For the current market here are some key takeaways:
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Investors should expect the bear market to persist throughout 2023.
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The Federal Reserve’s interest rate hikes should help to stabilize the economy at some point in 2023. This would lead to a potential market recovery.
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Investments should always be made based on what risk level you are comfortable with and your own investment timeline.
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Investing a set amount of money can help you maintain a better investing budget.
Is the Stock Market Recovering?
The stock market has bounced back somewhat during the first few months of 2023. But it has not been significant enough to repair the damage of a nearly 20% drop in the S&P 500 index last year. The market took another recent hit with chief investment officers and financial advisors alike getting nervous about bank collapses and closures such as with Silicon Valley Bank.
When Will the Stock Market Recover in 2024?
When will the stock market recover is a question no one has a solid answer for. While some experts think the stock market is more likely to recover next year, some experts do see some potential for recovery in 2024.
With the Federal Reserve raising interest rates, borrowing money is also increasing in price. This leads to less demand for goods and services. The Fed hopes that its actions in increasing interest rates will lead to slowing inflation and better economic conditions. Their actions have been partially successful during the first few quarters of 2023.
Unfortunately, higher rates and less spending in the United States usually equate to reduced corporate profits and market declines.
How Long Will It Take for the Stock Market To Recover?
Although there’s no way to answer this question with any level of certainty, there’s a strong chance that the bear market will come to an end and the market will begin to recover in 2023. It usually takes between 12 and 18 months for Fed rate hikes to lead to economic stability.
The Federal Reserve began increasing interest rates in March of 2022 and has continued to do so in 2023. Much like triage, you first have to stabilize the wound before you can operate and hope for improvement. As this stability sets in, the stock market recovery should slowly move back in the right direction.
How Long Did It Take for the Stock Market To Recover in the Past?
On average, bear markets last 289 days. However, some bear markets throughout history have been far shorter and some have been far longer. Timing the markets can be a crucial part of successful investment recovery and wealth management in the long term.
There’s no way to get the money you lost in the stock market back immediately. However, valuations are typically low during bear markets so stock prices will fluctuate. It’s a good idea to add more stock to your portfolio to begin recovering your losses as the market turns positive.
Final Take To GO
If you have been analyzing Dow Jones the last few years you know bear markets can be scary, but they don’t last forever. In 2022, the S&P 500 was down over 17% and experienced declines well over 20% at some points throughout the year. In 2023, instead of making a rash decision to pull your money out of the market, consider buying more shares. This could benefit you as the bull market takes hold and valuations and dollar cost averaging are low.
FAQ
Here are some answers to frequently asked questions about when the stock market will recover.
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How long will it take the U.S. stock market to recover?
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Unfortunately, there is no real way of knowing when the stock market will fully recover. Though many experts are predicting an upswing in market performance starting as early as 2024, investing in the stock market, per usual, remains unpredictable.
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Should you pull money out of the stock market?
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No, it is not necessary to pull money out of the stock market even when it’s performing poorly. In fact, consider buying more shares while valuations and dollar cost averaging are low to benefit you as the bull market takes hold.
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What is the stock market outlook for 2023?
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The stock market bounced back somewhat during the first few months of 2023, however, it was not a big enough bounce to repair all the damage of the last year. The market took another recent hit with chief investment officers and financial advisors alike getting nervous about bank collapses and closures.
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Will the stock market recover in 2024?
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Expert analysts expect the S&P 500 to climb an estimated 8% in early 2024. Take these estimates with a grain of salt as future forecasts are often widely unpredictable and inaccurate for everyone ranging from new investors to the Commonwealth Financial Network.
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Joshua Rodriguez contributed to the reporting for this article.
This article originally appeared on GOBankingRates.com: When Will the Stock Market Recover?