During recessions, history shows us that stocks often begin to recover before recessions end, and in considerable ways.
The line chart depicts the performance of the S&P 500 index from 1973 to 2021, including its performance through seven recessions.
The following lessons can be learned from the stock market's historical performance during recessions:
1. The recovery of stocks can begin the moment a recession starts. In the last 50 years, the fastest recovery has been two months in 2020.
2. Compared to the time spent, recessions are short. The longest recovery was the 2007-2009 recession, which lasted 16 months. The previous seven recessions have ranged in length from two months in 2020 to 18 months in the 2008 global financial crisis.
3. Investments defy certainty. No one can predict the length of a recession or how long it will take for the stock market to recover, but it is just the time to hold on or invest more capital to gain in up cycles.