It’s a question that gets asked every year — and every year, it’s just as impossible to anticipate. Even the so-called experts get it wrong.

Besides, as we saw in 2022, there are a lot of events that are simply impossible to predict. (Last January, our economic forecast for the year was “cloudy, with a chance of meatballs” — a metaphor referencing the classic children’s book — except the “meatballs” are all those unknown unknowns.) For example:

With surprises like these, it’s no wonder 2022 was a disappointing year for investors. So what comes next?

Like Sallie, I’m no fan of shorter-term predictions. But the data makes it clear that we’re not out of the woods yet. In my annual markets outlook this year, I consider all the factors currently in play, from the labor and housing markets to GDP — you can read the whole thing at the link below.

The TL;DR is this: While those experts are predicting a mild to deep recession, it’s still anyone’s guess.

And in any case, long-term investors shouldn’t be too worried. Recessions are a part of normal economic cycles; since 1857, the US has had more than 30 of them.

If we do end up in one, the key to getting through it is a diversified portfolio that can weather market shifts. It’s like an umbrella for those raining meatballs: You’ll probably still get wet, but you won’t be soaked. While we hope for a positive 2023, hope isn’t a strategy. Being prepared and keeping our sights on the long term is.

Here’s to a happy and healthy 2023, with fewer cloudy skies ahead.