The S&P 500 may be headed for its worst annual performance since 2008, but some stocks have still outperformed this year. Recession fears weighed on broad market indexes, which fell more than 19% in 2022. That’s worse than the 9% decline in the Dow Jones Industrial Average, and better than the nearly 33% decline in the Nasdaq Composite. That means the broad market index is on pace for its fourth-worst calendar year since World War II, according to CFRA chief investment strategist Sam Stovall. The only years with large declines are 2008, 1974, and 2002. Still, Stovall has a more positive outlook on 2023, saying markets move on after a historically down year. The strategist has a 12-month target price on the S&P 500 of 4,575, which is about 19% upside from Thursday’s close. “Our belief is that because the Fed will stop raising rates sometime in the first quarter, investors will begin to see the valley, as we call it, and decide to buy back into equities as the Fed has possibly engineered would have created — not a soft landing, but at least a mild recession — reducing inflation,” Stovall said. “Even though the Fed has told us that they do not actually plan to cut rates in 2023, they have admitted that they are dependent on the data, and since they waited too long to raise rates because of this data dependence. So I wouldn’t be surprised if they reduce rates faster than expected because of this data dependency,” he said. Breakdown The differences between the major indices this year can be explained by the composition. The S&P 500 has less exposure to underperforming sectors such as technology than the Dow, but more than the Nasdaq Composite. Meanwhile, the Dow has been more exposed to winning sectors such as energy. Among the S&P 500, communications services, consumer discretionary, information technology and real estate stocks were the worst laggards this year, down 41%, 38%, 29% and 28%, respectively. Investors shunned riskier assets ahead of growth concerns in 2023. Typically, the worst performing sectors perform better the following year. Stovall expects the outlook for consumer discretionary and information technology stocks to be more positive in 2023. However, he believes that communication services will face challenges in the next year given the continued regulatory scrutiny around the world. Meanwhile, energy stocks, which dominated the index this year, could head higher in 2023 as the reopening of China boosts oil demand. The sector was the only one out of 11 that was higher in 2022, gaining over 58% this year. Here are the best and worst stocks in the S&P 500. The biggest winner was Occidental Petroleum, the top stock in 2022, up more than 114% in its best year since at least 1972. Its next best year was in 1979 when shares soared. 72.2%. The stock started trading in 1964. Nevertheless, analysts have a hold rating on the stock, according to consensus estimates on FactSet. In a November note, analysts at Piper Sandler downgraded the stock to neutral, saying they “see more upside elsewhere” after the stock’s recent performance. Regardless, the $76.64 average price target on FactSet represents more than 20% upside as of Thursday’s closing price. Solar shares are also the first among the top 10 best-performing stocks in the S&P 500. Some on Wall Street expect they can continue to grow into next year. Goldman Sachs recently named the solar stock one of its top picks for 2023, saying it could continue to get a boost after the passage of the Inflation Reduction Act. Goldman Sachs analyst Brian Lee wrote, “While solar equities are outperforming in 2022 versus R2K, stocks are still ~20% below early ’21 peak levels and valuations are below pre-IRA levels.” Other big winners include Hess, Marathon Petroleum and Exxon Mobil. The biggest fallers, on the other hand, was Genrec, the worst-performing stock this year, down nearly 70% as of Thursday’s close. In November, Jefferies downgraded the stock from Hold to Underperform. The investment firm said the adoption of bidirectional charging in electric vehicles could pose a threat to the maker of backup power generators going forward. Meanwhile, Tesla was the fourth worst performing stock this year. Shares have plunged nearly 65% as investors worry about weak demand for electric vehicles as well as Twitter CEO Elon Musk’s management. Even one of Tesla’s biggest supporters on Wall Street, Morgan Stanley analyst Adam Jonas, recently lowered his expectations for the stock, though he said the electric vehicle maker still has competitors in the sector. Will lead Other worst performers in the S&P 500 include Match Group, Align Technology and SVB Financial Group.