Some investors may worry about the stock market sinking after a recession is officially announced. But history shows that markets incorporate expectations ahead of the news.
- The global financial crisis offers a lesson in the forward-looking nature of the stock market. The US recession spanned from December 2007 to May 2009 (shaded area).
- But the official “in recession” announcement came in December 2008—a year after the recession had started. By then, stock prices had already dropped more than 40%.
- Although the recession ended in May 2009, the announcement came 16 months later, by which time US stocks had rebounded.
Investors who look beyond after-the-fact headlines about markets and the economy and stick to a plan may be better positioned for long-term success.
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investment. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment.
In US dollars. S&P data © 2023 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.
Start and end dates of US recessions, along with announcement dates, are from the National Bureau of Economic Research (NBER). nber.org/research/data/us-business-cycle-expansions-and-contractions and
Stock price decline of more than 40% from December 2007–December 2008 is based on the S&P 500 Index’s price difference between the actual start of the recession in December 2007 and the official “in recession” announcement 12 months later.
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