Will FTSE shares crash again in 2023?

I think there is a good chance that investors in London-listed FTSE stocks will do well in 2023.

Nothing is certain or guaranteed with stocks. And because all businesses can face operational setbacks at any time. And broader economic and geopolitical events will continue to influence markets.

But volatility during 2022 masks some potentially positive trends. For example, interest rates are finally rising above the ultra-low levels they have been at for so long. And although higher rates may be difficult for borrowers in the short term, the move higher signals a return to rates closer to historical norms.

In theory, higher interest rates make it more expensive to borrow money and better to save. And people will tend to spend less to accommodate price inflation. Indeed, financial commentators have predicted a slowdown in the inflation rate for 2023.

lower valuations

But higher base interest rates tend to cause asset bubbles as well as deflate. And we’ve seen prices compress for many stocks and shares. Cryptocurrencies have also retreated. And the latest news from the property market suggests prices may fall.

All that adds up to short-term pain for investors. But I think the situation is positive for the long term. And because a lot of speculative bubbles have now been blown from valuations. Indeed, there is a lot of gloomy sentiment in the investment community. But market crashes tend to happen when stocks are already flying and everyone thinks they’re going to keep going up.

However, 2022 is a tough year for stocks and shares. And, to me, that means the right conditions for a stock market crash don’t exist. However, the path of least resistance looks like stocks could go higher. And the move will be driven by recovery and growth in the business behind it.

I know the forecasters have predicted a long recession for the UK economy. But it is important to remember that stocks and shares are not the economy. The stock market looks ahead and always tries to anticipate future and indirect events.

And the most likely outcome is that the economy will recover from recession. And it will be positive for business. So, I think stocks and shares will be higher from their current lows in 2023.

The market has reset

Volatility in 2022 makes investors benefit. It resets the stock market and clears overvaluations. And, to me, there hasn’t been any upside potential for stocks and shares in years.

I think this is the best time to invest in carefully selected stocks backed by quality businesses that have good prospects for recovery and growth. And I intend to hold the stock for the long term.

I do not believe that FTSE shares will fall again in 2023. However, I have taken the risks associated with shares. And I have bought it to expose my portfolio to business potential.