Long-Term Investors, Don’t Let a Recession Faze You
Exhibit 1. Downturns, Then Upturns.
Past performance, including hypothetical performance, is not a guarantee of future results.
With the announcement that Tesla and other high profiles companies are laying off employees for the first time in a fair while, recessions concerns are in the news. From a markets perspective, we have already experienced a drop in stocks, as prices have likely incorporated the growing chance of recession. Investors may be tempted to abandon equities and go to cash because of perceptions of recessions and their impact. But across the two years that follow a recession’s onset, equities have a history of positive performance.
Data covering the past century’s 15 US recessions show that investors tended to be rewarded for sticking with stocks. Exhibit 1 shows that in 11 of the 15 instances, or 73% of the time, returns on stocks were positive two years after a recession began. The annualized market return for the two years following a recession’s start averaged 7.8%.
The Takeaway:
Recessions understandably trigger worries over how markets might perform. But history can be a comfort for investors wondering whether now may be the time to move out of stocks.
Past performance, including hypothetical performance, is not a guarantee of future results.
Credit to Dimensional Fund Advisors 1-pager.
Disclaimer: Past performance is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. Investments in securities involve the risk of loss. Nothing in this blog should be considered financial advice or recommendations. Your questions are unique to you and your own personal financial circumstances. You should consult with a financial professional before making a financial decision. See full blog disclaimer.