The S&P 500 index is essentially the most broadly adopted benchmark on Wall Avenue. Retail traders, analysts, and fund managers alike use it to gauge the relative performances of their very own inventory portfolios as a result of the index — comprised of 500 of the biggest U.S. corporations throughout all industries — represents a cross-section of the broader economic system. 

In 2022, it declined by 19.4%, and even factoring in dividends, its whole return stage fell by 18.1% — the index’s worst efficiency for the reason that 2008 international monetary disaster.

Consecutive down years are fairly uncommon

The S&P 500 in its current type was constructed in 1957. Within the 65-year stretch since then, there have been two intervals when the index declined in consecutive years, and each have been triggered by important political and financial occasions. They embody President Nixon’s Watergate scandal from 1972 to 1974 mixed with the OPEC oil embargo, and the dot-com tech bust within the early 2000s. 

The vast majority of the time, the index bounces again strongly after its down years, and that bodes properly for traders in 2023. Excluding the 2 situations talked about above, it has returned a median of 23.4% within the years instantly following a loss. If historical past repeats, the S&P 500 may end 2023 at 4,718.

However in fact, that is not a given. The U.S. economic system is below stress in the intervening time, with above-average inflation, rising rates of interest, and different macro headwinds pressuring households and companies. Plus, the regional banking sector was in disaster final week earlier than the federal government intervened, following the failure of SVB Monetary, the father or mother of Silicon Valley Financial institution. 

But when historical past does repeat, listed below are two shares that could possibly be set for sturdy rebounds after falling steeply from their all-time highs. 

1. Tesla continues to dominate the electrical automobile market

Tesla (TSLA 5.03%) has loads of long-term development drivers, from synthetic intelligence to robotaxis to robotics, however its continued management within the electrical automobile trade is what is going to possible help its inventory value in 2023. 

Because of the opening of two new gigafactories (one in Berlin and one in Texas) final yr, the corporate was capable of ship a document 1.31 million automobiles in 2022 — a rise of 40% in comparison with 2021. These services are nonetheless ramping as much as most capability, and after they get there, Tesla believes it may produce 2 million automobiles per yr. Expectations counsel it may come near that mark in 2023. 

Promoting that many models could be a powerful feat given the broader financial state of affairs, however this firm has by no means shied away from a problem. It lately slashed costs on a few of its flagship fashions to spur demand, which dealt a blow to the rivals attempting to construct their very own presences within the EV trade. Tesla has the best gross revenue margin of any EV producer, so it will probably trim costs with out sending its backside line into the pink. 

The financial turmoil is not affecting the corporate’s long-term targets, both. It simply revealed plans to construct its subsequent gigafactory in Mexico, and EV manufacture at that web site may begin as quickly as subsequent yr. It is a part of Tesla’s broader plan to have as many as 12 gigafactories with a complete manufacturing capability of 20 million automobiles per yr in operation by 2030.

Tesla inventory is buying and selling down 57% from its all-time excessive, nevertheless it nonetheless trades at a price-to-earnings (P/E) ratio of 42.8, which is properly above the 17.8 P/E of the S&P 500 and likewise above the 25.1 P/E of the Nasdaq-100 know-how index. However Tesla has a historical past of buying and selling at a juicy premium due to its constantly excessive development charges and its numerous pipeline of modern applied sciences. 

If historical past repeats for the S&P 500 in 2023, count on traders to reap the benefits of the low cost on Tesla inventory to purchase in for the long run. 

2. Meta Platforms would possibly quickly have the wind at its again

Meta Platforms (META 7.25%) inventory has been below intense strain during the last 18 months, struggling a peak-to-trough lack of 77% at its low level of $88.09 a share. It has since rebounded to the neighborhood of $190, although it stays about 50% under its all-time excessive. 

The social media big has suffered from a sequence of inside and exterior challenges. The digital promoting market has been punished on account of broad financial weak spot, and a formidable competitor has emerged in ByteDance‘s TikTok platform, which is luring advert {dollars} away from Meta’s Fb and Instagram social media apps. 

In the meantime, Meta is targeted on constructing out its model of the metaverse, an concept it spent $13.7 billion on in 2022, although significant income from these efforts is, at greatest, years away. Traders referred to as upon the corporate to slash prices and swap its focus again to its core household of apps, significantly its Reels function, which is designed to compete with TikTok, after its income and earnings continued to sink. 

Meta answered the cost-cutting name by shedding 11,000 staff in November, and this week introduced that one other 10,000 layoffs are coming and that 5,000 open positions will not be stuffed.

On a separate observe, elevated U.S. inflation has declined steadily for seven months, which may present the economic system with some welcome reduction. For Meta, the mix of a extra cost-efficient group and an financial restoration may considerably increase enterprise in 2023, and there have been indicators of that in 2022’s fourth quarter.

The corporate earned $8.59 per share in 2022, so its inventory trades at a P/E ratio of 21. That is nonetheless 16% cheaper than the Nasdaq-100, even after Meta’s inventory value doubled from its current low level. If the broader market levels a restoration this yr — as historical past suggests is probably going — search for Meta Platforms inventory to go increased.