Chart Content: S&P 500 performance measurements during two key intervals. The first is the period between the market’s peak and that of the start of a recession, and the second is the total peak-to-trough market downside through the recession.
Chart Significance: Historically, equity returns have remained favorable until approximately six months prior to the start of a recession, and the bulk of equity losses tend to occur after a recession has begun. When looking at data from post-World War II recessions, the S&P 500’s median decline was 7% from its peak through the start of a recession, followed by 24% downside from its peak to the trough during the recession. What’s most important in this data, however, is understanding that the announcement of an official recession occurs six months after the official start date, which is the date utilized in this data set. In other words, the announcement itself is a significant lagging indicator.
Potential Forward-Looking Implications: The onset announcement of a recession is not sufficient criterion to underweight equities. Historical analysis showcases the complete opposite to be true, and it may be time to consider overweighting equities. Investors must consider how far equities have fallen at the announced onset of a recession and gauge where additional opportunities remain possible within equity markets.
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Investment advice offered through CX Institutional, a registered investment advisor.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in the presentation may not develop as predicted.
All data is sourced from Bloomberg, through the release of monthly figures from the U.S. Bureau of Labor Statistics or from the Federal Reserve and any of its affiliated regional location.