Historical Look at the S&P 500 During Recessions
By Stephen Smith
February 5th, 2008
With all the talk of a possible recession, it is useful to see how the S&P 500 actually performed during recessionary periods. The table also shows how the S&P performed in the six months before and in the twelve months after a recession.
- The S&P 500 on average loses nine percent of its value in the six months preceding the start of a recession. This negative pattern is tied to all recessions with a range of four percent down, which is the best performance occurring in the 1957-1958 recession, to the worst performance of fifteen percent down, occurring in the 1981-1982 recession.
- The table also shows the S&P 500 on average rebounded during the recession. Two of the best performances returned twenty-three percent! These returns occurred in the 1980 recession and the 1990-1991 recession. The worst performance of negative fifteen percent occurred in the 1973-1975 recession, but on average the S&P 500 returned ten percent during a recession.
- Looking out twelve months after a recession ends shows returns were quite good, averaging twelve percent. The best performance of forty-one percent happened after the 1953-1954 recession. The worst performance of down twenty-three percent came after the 2001 recession.
- If you linked these three time periods (prior six months, the recessionary period, and one year later) the average return would be thirteen percent. Not all recessions, of course, are of equal length. Annualizing the returns results in five percent overall.
