I came across a couple pieces about recessions that I thought would be worth passing on to all of you. The first is American Funds “Guide to Recessions” and some of the highlights are:
- Recessions have been infrequent. The U.S has been in an official recession less than 15% of all months since 1950.
- Recessions have been relatively short. The current expansion has been longer than the last 10 recessions combined.
- Recessions have been less impactful than expansions. The average recession leads to a contradiction of less than 2% in GDP. Expansions grow the economy by about 25% on average
Here is the accompanying chart:
Another interesting statistic I came across from Leg Mason’s Michael LaBella is that over the last 80 years, the market has bottomed on average 107 days before the end of a recession. But the reality gets worse because you don’t get the announcement that the recession has ended form the National Bureau of Economic Research (NBER) until months after the fact meaning that if an investor is waited for the all clear to invest or put money to work they have already missed a huge portion of the recovery in equities.
Lets look at the great recession of 2007-2009 as an example. The S&P 500 bottomed out on March 9, 2009 at 676 yet the recession didn’t end until June. On June 30th the S&P500 was at 919 which was 36% off of it’s low. On top of that, the NBRE didn’t announce that we were out of the recession until September 21st, at which point the S&P500 was trading at 1,065 which was 57% off of it’s low.
We don’t know what the shape of the recovery will look like, but we do know the only way to participate in it fully is to stick to your plan. My job is to help you do that and its what I love doing. Please let me know if you would like to discuss anything and thank you for the honor of serving you.
David R Henderson
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