The ASX share market has seen plenty of volatility this year. After such a rocky year, investors are now turning attention. How are things going to go?
'Invest for the long term' is an often-advised suggestion when it comes to ASX shares. But, it can be easy to get wrapped up in what's going to happen next month or even next year.
I'd guess that many people aren't investing with a one-year timeline in mind, so why do people focus so much on the short-term forecast?
Investors that can see through the noise of short-term thoughts and volatility may be able to identify long-term opportunities.
Don't predict, but 2023 could be bumpy
The Motley Fool's Scott Phillips was recently asked about what might happen in 2023. His response was full of wise words. Phillips' initial response was:
Let me start with a quote from JP Morgan himself, not JP Morgan, the investment bank, JP Morgan, John Pierpont Morgan himself. When asked what the market will do, he gave the very best answer. He said it will fluctuate. So that's my prediction for 2023.
My prediction is, people are going to keep predicting. But my advice is, don't try to predict what's going to happen next.
But what I would say about 2023, is a bit like I talked about in 2022, prepare for what's likely to be a bumpy ride. I say bumpy ride economically, but also on the market because we simply don't know what's coming next.
But, he did point out that national savings is declining, which could mean there's "less money going to be spent".
Phillips also suggested that the RBA rate rises to reduce inflation could put pressure on discretionary spending and on the economy in general.
He suggested that the combination of headwinds that are happening right now raises "the rise of a potential recession in Australia over the next six months". However, for now, the RBA is not predicting an official recession – it thinks the economy could grow 1.5% in 2023 and 2024.
We have seen the fall of the share prices of some ASX retail shares in anticipation of a downturn, such as Wesfarmers Ltd (ASX: WES).
Think about ASX shares for the long term
Phillips also said that investors are trying to focus on the little things, rather than being largely correct about the big picture.
He pointed out that it's not the short term, but the long term that counts with ASX shares. Look at the great businesses that can keep getting stronger:
People are so desperately trying to get the little things right. And maybe missing the opportunities. Just get the big thing, right.
My broad point is, businesses that are going to be meaningfully bigger and better in five or 10, 15 years time, it doesn't matter what happens to the next year, it's just completely irrelevant. As long as they make it through without going broke. You need to make sure they're not going to go broke — so careful of debt — and be a business that's going to be able to maintain a lead in front of their competitors. Whether it's product or price or brand or cost or something, whatever separates them from the rest. The best businesses tend to keep getting better.
