The stock market has had an incredible start to the 2023 calendar year. Rewind back to the start of January, and we'll see the S&P/ASX 200 Index (ASX: XJO) was at 7,038.7 points.
But today, the ASX 200 is sitting at 7,541 points at the time of writing, a good 7.1% above where it began the year at. Historically speaking, this is an incredibly positive start to the trading year.
What's funny is that the end of 2022 was dominated by investor pessimism. Predictions were abounding that 2023 would 'inevitably' see a recession.
Rising interest rates and high inflation would result in a hard landing for the US economy, and probably Australia's too. Thus, shares were going to have a dreadful year.
Well, anyone who sold their shares on this pessimism would probably be feeling pretty silly right about now.
So that brings us to the question: will there be a stock market crash in 2023?
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Is the stock market heading for an ASX 200 crash in 2023?
Well, I'll keep this one simple: I have no idea.
There could be a recession in 2023, or there might not be.
The share market could crash if we have a recession, or it could go higher.
The economy could boom but shares go into a bear market.
All of these scenarios are possible.
But I don't have a crystal ball. Even economists get these kinds of predictions wrong all of the time. And I'm not an economist.
So I'm not going to make any kind of predictions here today. And I'm certainly not basing my investing actions on what might happen to the stock market or the economy this year.
Instead, I'll be trying to follow the advice of the legendary investor Warren Buffett.
Back in his 2012 letter to the shareholders of Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B), Buffett said this about trying to invest based on economic indicators:
Of course, the immediate future is uncertain; America has faced the unknown since 1776. It's just that sometimes people focus on the myriad of uncertainties that always exist while at other times they ignore them (usually because the recent past has been uneventful)…
American business will do fine over time. And stocks will do well just as certainly, since their fate is tied to business performance. Periodic setbacks will occur, yes, but investors and managers are in a game that is heavily stacked in their favor.
The Dow Jones Industrials advanced from 66 to 11,497 in the 20th Century, a staggering 17,320% increase that materialized despite four costly wars, a Great Depression and many recessions. And don't forget that shareholders received substantial dividends throughout the century as well.
Since the basic game is so favorable, Charlie [Munger] and I believe it's a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of "experts", or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it.
So instead of worrying about whether there'll be a stock market crash in 2023 or not, I'm going to keep on doing what I've always tried to do: invest in the best ASX shares and exchange-traded funds (ETFs) as much as possible, at the best prices possible.
At the end of the day, nothing else really matters.
Sure, we'll get the occasional stock market crash. But these crashes are just good opportunities to load up on our favourite shares and ETFs at even better prices.
Worrying about recessions, stock market crashes, and trying to time the market is a fool's game (and not the good kind of Fool). I think we're all better off playing Buffett's game instead.
