Should I Invest During a Recession?

Advanced Concepts
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30

September

2022

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During recessions, history shows us that stocks often begin to recover before recessions end, and in considerable ways.

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The line chart depicts the performance of the S&P 500 index from 1973 to 2021, including its performance through seven recessions.

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Line chart shows the performance of the S&P 500 Index from 1973 through 2021, including its performance during seven recessions. During the recession that began in November 1973 and ended in February 1975, the S&P 500 Index reached its low toward the end of this period, in September 1974. The next recession lasted six months, from January through June 1980.The S&P reached its low in March, slightly earlier than in the previous recession. The recession that began in July 1981 lasted until October 1982. The low point of the S&P 500 Index occurred relatively late in the period, in July 1982. During the recession that began in July 1990 and extended through February 1991, the S&P 500 Index hit its low in the middle of the period, in October 1990. For the recession that occurred from March through October 2001, the low occurred late in the period, in September. The next recession started in December 2007 and lasted through May 2009. The low for the S&P 500 Index occurred near the end of the period, in February 2009. During the 2020 recession, which lasted only two months, the low occurred during the latter half of the period, in March.

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The following lessons can be learned from the stock market's historical performance during recessions:

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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.

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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.

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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.

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Eyal Zadik

Strategy Advisor