The bear market in 2022 witnessed a 19% decline in the S&P Index while the NASDAQ Composite Index plunged 33.1%. “Recency bias” reared its head once again as most market forecasts at year end predicted that the bear market would continue into 2023.
Golden Eagle’s research shows that severe market downturns in one year are often followed by a vigorous rebound in the next year. As such, it comes as no surprise to Golden Eagle that the stock market defied the gloom and doom predictions in the first quarter as the S&P 500 Index advanced 7.5% while the Nasdaq Composite Index shot up 17.0%.
Despite widespread bearish sentiment at the start of this year, there is a body of evidence which indicates that a major market recovery is in store for 2023. We have already shared our view that a major market recovery is probably in the making, which was published in Barron’s last month. Let’s take a look at the chart to the right, which details the stock market performance after the worst three calendar year declines since WWII.1
In looking more closely at market returns coming out of a bear market, historical evidence speaks volumes about forward market prospects when taking into account how different fund styles perform. The chart below depicts the 5-year returns for each investment style following each of those down years.
It seems obvious that the best potential returns over the long term are offered by the aggressive growth asset class, which has proven to be the most rewarding in past market recoveries.
Investors seeking to maximize returns in their portfolios over both the next year as well as the next 10 years may want to consider adding an aggressive growth stock fund to their holdings. This asset class tends to be under owned in most portfolios and is rarely discussed in investment circles. Less than $100 billion in a $40 trillion US stock market is invested in the aggressive growth style despite historically superior returns.
1 The Aggressive Growth Index (“AGF Index”) consists of 12 publicly traded aggressive growth funds (ETFs and Mutual Funds) similar to the investment objective of Golden Eagle Strategies. Prior to 2005 the Weisenberger Mutual Fund Report was used. Growth is based upon the Russell 1000 Growth Fund (^RLG), Value is based upon the Russell 1000 Value Fund (^RLV) and the S&P is based upon the S&P Total Return Index
The bear market in 2022 witnessed a 19% decline in the S&P Index while the NASDAQ Composite Index plunged 33.1%. “Recency bias” reared its head once again as most market forecasts at year end predicted that the bear market would continue into 2023.
Golden Eagle’s research shows that severe market downturns in one year are often followed by a vigorous rebound in the next year. As such, it comes as no surprise to Golden Eagle that the stock market defied the gloom and doom predictions in the first quarter as the S&P 500 Index advanced 7.5% while the Nasdaq Composite Index shot up 17.0%.
Despite widespread bearish sentiment at the start of this year, there is a body of evidence which indicates that a major market recovery is in store for 2023. We have already shared our view that a major market recovery is probably in the making, which was published in Barron’s last month. Let’s take a look at the chart to the right, which details the stock market performance after the worst three calendar year declines since WWII.1
In looking more closely at market returns coming out of a bear market, historical evidence speaks volumes about forward market prospects when taking into account how different fund styles perform. The chart below depicts the 5-year returns for each investment style following each of those down years.
It seems obvious that the best potential returns over the long term are offered by the aggressive growth asset class, which has proven to be the most rewarding in past market recoveries.
Investors seeking to maximize returns in their portfolios over both the next year as well as the next 10 years may want to consider adding an aggressive growth stock fund to their holdings. This asset class tends to be under owned in most portfolios and is rarely discussed in investment circles. Less than $100 billion in a $40 trillion US stock market is invested in the aggressive growth style despite historically superior returns.
1 The Aggressive Growth Index (“AGF Index”) consists of 12 publicly traded aggressive growth funds (ETFs and Mutual Funds) similar to the investment objective of Golden Eagle Strategies. Prior to 2005 the Weisenberger Mutual Fund Report was used. Growth is based upon the Russell 1000 Growth Fund (^RLG), Value is based upon the Russell 1000 Value Fund (^RLV) and the S&P is based upon the S&P Total Return Index
Manager of the Golden Eagle Growth Strategy
