Given all the media attention surrounding the possibility of a recession, we thought we would share some facts as it relates to past recessions. Before the Covid recession of 2020, the United States had experienced 15 recessions in the last century. In 11 of those cases, or 73% of the time, the market ended positive two years after the recession began [1]. The average annualized rate of return of all 15 recessions after 2 years was 7.8% which includes even the worst recessions the US has experienced. This is notable for investors, as it may seem counterintuitive that the economy can experience a contraction in industrial production and GDP, but it may not directly coincide with, or even produce a negative stock market return. Take for example the recession after World War II: industrial production dropped a whopping 26% during the eight-month recession, but the total stock market return for the coinciding months produced a positive 15% rate of return. Even leading up to the recession the market return was positive from a year prior. To view this period, as well as all the past recessions and their respective stock market returns click the image below.

 

[1] https://www.dimensional.com/us-en/insights/long-term-investors-dont-let-a-recession-faze-you

 

*Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Short term performance results should be considered in connection with longer term performance results.