After a tumultuous year, the market has been surging in recent weeks. The S&P 500 is currently up by around 7% since the beginning of the year, giving some investors hope that we're about to enter a new bull market.
However, many experts are still warning about an impending recession in 2023. In fact, analysts from JPMorgan Chase now believe there's a greater than 50% chance we'll experience a recession by the end of the year.
Is it really a good time to invest, then? Or should you hold off a little longer? Here's what you need to know.
The good (and bad) news about the stock market
The bad news is that nobody knows for certain how the market will perform. However, while past performance isn't indicative of future returns, it can be helpful to see what history says about times like these.
The stock market is forward-looking, which means it will often experience fluctuations ahead of the economy.
For example, the S&P 500 first began its descent in January 2022, as investors worried that the Federal Reserve would increase interest rates in an effort to curb inflation. The Fed did not begin raising rates until March 2022, however, and gross domestic product (GDP) is expected to grow at a slower-than-average pace through 2024.
The bright side, though, is that the forward-looking nature of the stock market also works the other way -- meaning the market will often recover from downturns before the economy. In fact, in every recession over the last 50 years (excluding the dot-com bubble burst in the early 2000s), the S&P 500 began its recovery before GDP reached its low point.
This is good news for investors, because it means we may not need to wait until the economy recovers before the market begins to surge again.
Should you still invest right now?
Although the future may look bleak at the moment, it's actually one of the best times to invest -- especially if you want to avoid missing out on the next bull market.
Because the stock market can be unpredictable, nobody can say exactly when prices have bottomed out. We may already be past that point, or stocks could have further to fall. But if you wait until the economy shows signs of improvement, you'll likely miss the early stages of the market's rebound.
Say, for example, you decided to invest in an S&P 500 index fund back in January 2009 -- just before the market bottomed out during the Great Recession.
At the time, that may have seemed like the worst possible moment to invest, as your investment would have almost immediately lost value. However, by the end of the year, you'd still have earned returns of more than 23%.
In contrast, say you had waited until August to invest. By that time, the market would have been well into recovery mode, and it may have seemed like a better time to buy. But in that case, you'd have only earned returns of around 13% by the end of the year.
Right now may seem like a shaky time to invest, but keep in mind that the market's long-term performance is far more important than its short-term ups and downs. Even if stock prices fall further this year, it's only a matter of time before the next upswing.
Nobody can predict the short-term movements of the market, but don't let potential volatility scare you away from investing. Chances are good that stock prices will recover before the economy, and by investing now, you'll be in a fantastic position to take advantage of the next bull market.
