Economics and markets
August 30, 2022
Preliminary data suggest that the U.S. economy contracted between April and June for a second straight quarter. Investors wondering if we’re in a recession and whether they should adjust their portfolios should consider history: Stocks tend to begin to rebound during recessions, in anticipation of a return to economic and corporate earnings growth.
Sources: Vanguard calculations as of December 31, 2021, using data from Refinitiv.
Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.
The chart shows the one-year annualized return of the Standard & Poor’s 500 Index from 1973 to 2021, including its performance during the period’s seven recessions, as defined by the National Bureau of Economic Research (NBER) and represented by the gray bars. In all cases, the stock market began to recover even as the economy continued to shrink.
There are several key takeaways from the historical performance of stocks during recessions.
Whether the United States or any other country or region is in a recession or not, investors should avoid overreacting to the latest economic news and stick with well-considered, long-term investment plans. There’s no evidence that efforts to time the markets reward investors. Quite the opposite, in fact.
Investors who want help setting investment goals or balancing potential rewards and risks in their portfolios may want to explore our advice offerings. Our unique, investor-owned structure keeps us focused on your needs first.1
1 Vanguard is investor-owned, meaning the fund shareholders own the funds, which in turn own Vanguard.
All investing is subject to risk, including the possible loss of the money you invest.
Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.