Will the Scottish Mortgage share price recover in 2023?

At Scottish Mortgage Investment Trust (LSE: SMT) has had a dismal 2022, with its share price falling by almost 45%. But investors did not give up. This is the best selling investment trust in AJ Bell platform in January.

For as long as I can remember, private investors have been dismissed as short termists. They stand accused of jumping on the hot trend at the top of the market, then run in panic at the bottom, turning paper losses into real.

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No doubt many investors sold Scottish Mortgage after last year’s crash. But many take this opportunity to buy as well. Could there be more contrasting private investors than we think?

As a long-term writer for the Fool, I hope so. We urge investors to go shopping for shares after they fall and the top shares are trading at bargain prices.

Scottish Mortgage is tempting up front, but I approach it with caution. While enjoying the blistering performance during the US tech boom, there is no guarantee it can repeat that success. Top portfolio holdings such as Amazon and Tesla fly in an era of near-zero interest rates and endless fiscal and monetary stimulus. When inflation rages, those days are gone.

I suspect one reason Scottish Mortgage remains popular is that investors calculate that the US Federal Reserve and other central banks will soon stop raising interest rates as inflation falls, and start cutting instead. If that happens, risky growth stocks will be back in vogue, technology will fly and take over Scottish Mortgage. That’s a theory, anyway.

We are not there yet. There are signs that inflation is already evident, and we will have to wait a little longer for interest rate cuts. Also, macro events are unpredictable.

If I buy a Scottish Mortgage today, it will be with a long-term view. I do not expect a quick recovery this year, but give it five or 10 years.

But then, why buy Scottish Mortgage at all? Are current buyers still enticed by past performance? I suspect the same. After all, trust is still up 90% in five years, and an astonishing 420% in 10 years.

We encourage long-term investing at The Motley Fool, and these performance figures confirm how profitable it can be. My concern is that Scottish Mortgage funds are taken moment by moment, and one that may not return.

I would still buy it, but only for one reason. To plug the portfolio gap. The management was focused on buying smaller, fast-growing companies, and I was able to do more in that corner of the market. But not now.

Today, my focus is on buying the top FTSE 100 dividend stocks. The index is very close, but there are still many deals to be had.