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The stock market is more than historical averages!

Last year, nearly 14 Wall Street strategists produced 2022 year-end SPX projections ranging from a low of 4,400 to a high of 5,300. With two-plus months left before the end of the year, it is proving incredibly difficult to achieve these lofty SPX targets.

Last month Wall Street firms published their 2023 forecasts for the S&P 500 Index. The seven equity strategists with SPX projections for next year ranged from a low of 3,800 to a high of 4,200.

Capital Economics came in on the low end of the forecasts at 3,800. Many strategists gravitated toward the middle with projections of 3,900 (Morgan Stanley and Citi) and 4,000 (Goldman Sachs and HSBC). UBS came in on the high end at 4,200. SPX closing today at 3,577.03 would imply SPX returns of 6% to 12% for next year.

Interestingly, Wall Street SPX forecasts for next year hovered around the 8% SPX annual returns or close to the long-term average annual returns of 7.98% (ex-2022) dating back to 1928.

Upon further review of the yearly SPX returns over the past 94 years, it is rare to see SPX closing the year with gains of 8%. The historical average returns are not the norm, and investors need to understand this. There were many more periods of weak or negative and outlandish above-average SPX returns.

It may be reasonable to expect positive SPX returns over the long term. But one should not assume SPX can generate consistent 8% returns each year.

Over the past two decades plus it has been volatile. The lost decade of the 2000s led to investors generating negative total returns from 2000 to 2009 as the market suffered 50% setbacks not once but twice. To start the new decade (2020), SPX has experienced two sharp declines, including the 35.41% bear decline from Feb-Mar 2020 Covid-19 Pandemic/recession and the current -25.77% QT bear decline.

Market corrections and bear market declines have gone deeper and lasted much longer than before. Also, the stock market is much more volatile than in the past.

How accurate the Wall Street strategists' projections for 2023 are anyone's guess. However, SPX has witnessed two bear declines in less than three years. The last occurrence dates back to the Great Depression.

History tends to repeat or rhyme. Stock market crashes, geopolitical crises, macroeconomic conditions, and credit situations are the norm. Almost every generation has had to deal with these challenging issues.

Is the increase in market volatility and the two bear market declines over the past two years signaling that the next decade will be more challenging than expected?

Is the late-1970s/early-1980s bear market environment similar to the current iteration of high inflation, high-interest rates, geopolitical uncertainties, and tight monetary policies?

Does this lead to a market capitulation or selling climax, creating another generational buying opportunity?

Or will the market transition toward the next decade of lost opportunities?

Attached is a monthly Bollinger Bands chart of the SPX accompanied by the VIX Index and a linear regression/best fit line.

SPX nears a critical juncture as it tests the bottom of its monthly Bollinger Bands (3,583.26).

Failure to maintain pivotal support coupled with the rolling over of the 30-month ma (3,966) and the 40-month ma (3,724) via a death cross-sell signal warns of the next SPX selloff.

However, the ability to successfully rebound from the bottom of the Bollinger Bands and clear above the 30-mo and 40-mo moving averages signals the resumption of the structural bull trend.

Source: Chart courtesy of and

Source: Chart courtesy of

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