Recessions and the equity market: A framework for investors

Christian J. Galipeau

Christian J. Galipeau
Senior Investment Director, 03/25/20

In these days of significant market volatility, investors are looking for perspective.

In order to provide some framework for investors, we reviewed every recession over the past 50 years in the United States. Our analysis focused on identifying the recessionary periods, the number of months it took from the peak of the business cycle until the trough of the business cycle, as well as the number of months the business cycle expanded post-recession.

We calculated the mean trough period as well as the mean expansion period.

Additionally, using the S&P 500 Index as the source of the data, we analyzed the equity market’s peak-to-trough decline, its trough-to-peak gains, and the market’s ability to anticipate both the recession and the expansion.

What follows are the results of our research.

We are very aware that many features of the current downturn are unprecedented, but historical comparisons can still be helpful for perspective that economies and markets have adapted, adjusted, and recovered in past cycles.