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Why ‘Just Right’ is Just Right: How the Stock Market Could Close 2023 on a High Note

Hey investors, grab a chair and maybe even some popcorn because the stock market story for 2023 could be more riveting than a Hollywood blockbuster. We’re talking about a potentially record-breaking performance for the S&P 500. But, before we get carried away, let’s talk about why experts think the conditions are “just right” for an exciting finale to 2023.

The Goldilocks Zone for Stocks

You’re probably familiar with Goldilocks—the young lady who wanted her porridge neither too hot nor too cold. Similarly, the stock market finds itself in a ‘Goldilocks Zone.’ We’re looking at an S&P 500 that’s up nearly 18% year-to-date as we step into September. Why is that noteworthy? Because it means the conditions might be perfect for an incredibly bullish Q4.

September: Not Always the Cruel Stepmother of Stocks

Let’s face it: September usually isn’t kind to stock market returns. History tells us that since 1928, the stock market is up just 44% of the time in September, with disappointing average and median returns of -1.16% and -0.49%, respectively.

However, when the market is already up by 10% to 20% going into the month—like it is this year—it turns out September is quite hospitable. Returns are positive 65% of the time with average and median gains of 0.77% and 1.49%. Talk about flipping the script!

Why the August Sell-Off Was a Blessing in Disguise

Remember that little sell-off in August that made some investors uneasy? Turns out, it was probably for the best. If the S&P 500 had roared into September with more than a 20% YTD gain, the outlook wouldn’t be as rosy. The reason? Too much of a good thing can be bad. When the market is up more than 20% entering September, it’s positive only 45% of the time that month and the outlook for the rest of the year isn’t exactly glowing either.

Rolling into a Record-Breaking 2023 Finale?

Now for the pièce de résistance. In a Goldilocks scenario like the one we’re in, the market is up a whopping 91% of the time from September through December. We’re talking average and median gains of 7.57% and 8.17%, respectively. Translate that to the S&P 500, and we could be looking at an index smashing previous records with year-end figures between 4,850 and 4,875. That’s good news, especially considering the bearish dive the market took in early 2022.

The Takeaway: Carpe Diem, But Keep an Eye on the Woods

So, investors, you might want to get ready for a potentially spectacular end to 2023. Of course, investing isn’t a fairy tale, and there are always bears in the woods (pun intended). Make sure you consult with a financial advisor, diversify your portfolio, and keep a watchful eye on market conditions.