Many stories have been written recently suggesting the economy is headed into a recession. Given that most recessions are officially diagnosed about a year after they are over, we wanted to share investment results from recent recessions and in the years immediately following them.
A recession is defined as a significant decline in economic activity of several months or years. The media often describes recessions in gloomy terms which lead many people to fear them. While economic downturns are never desired, they are not reasons to panic or abandon your investment strategy.
Surprisingly, the stock market delivered positive returns during five of the seven recessionary periods over the last 50 years. Although the most recent recession in 2020 lasted only two months, the other economic contractions lasted between six and 18 months. Assuming we enter a new recession soon, it would be reasonable to assume that it may last through the end of the year. However, history suggests it would also be reasonable to expect the markets to rise during this period.
While past performance is no guarantee of future results, we hope having the facts about prior market downturns during recessionary periods will provide you with some comfort in the months to come. And of course, we are always here to review your investment strategy and answer any questions you may have about the markets and the economy.