- In the past century, there have been 15 recessions in the US. In 11 of those instances, stock returns were positive two years after the recession began.
- Investors may be tempted to abandon equities and go to cash when there is heightened risk of an economic downturn.
- But research has shown that stock prices incorporate expectations of a recession and generally have fallen in value before a recession even begins.
- The average annualized return two years after the onset of these 15 recessions was 7.8%.
- A $10,000 investment at the peak of the business cycle would have grown to $11,937, after two years on average.
Recessions understandably trigger worries. But a history of positive average performance following a recession can be a comfort for investors wondering about sticking with stocks.