Stats › Bear markets and drawdowns › Recessions
How stocks perform in recessions
A recession is a stretch where the economy shrinks. The instinct most people have is that stocks fall the whole way through one and start recovering once it's over. What the record shows is close to the opposite in its timing. The market does most of its falling early, turns while the economic news is still getting worse, and has largely recovered by the time anyone officially declares the recession finished.
This page covers the eleven US recessions since 1950. What the S&P 500 did in the year before each one, how far it fell to its low, where in the contraction that low arrived, where the index stood on the official end date, and what happened in the year afterwards. The figure that surprises most people is that last stage: on average the market was down only about 1% when the recession formally ended, and in five of the eleven it had already fully recovered.
There's a catch big enough to deserve its own section, and it's about who decides when a recession starts and stops. I've put it in the middle of the page rather than in a footnote, because it changes what this data can honestly be used for. One source here, dated and linked at the bottom, and it's a secondary one, which I say plainly in the note rather than leaving you to work out.
Across the 11 recessions since 1950, the S&P 500 fell about 21% from its pre recession level to its low. But the low arrived about 169 days into an average recession lasting 312 days, meaning the market bottomed roughly halfway through. By the time each recession formally ended, the market was down only about 1% on average, and in 5 of the 11 it had already recovered fully. In the year after a recession ended, the index averaged +15.5%.
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