Markets Don’t Wait for Official Announcements
December 2022
Some investors may worry about the stock market sinking after a recession is officially announced. But history shows that markets incorporate expectations ahead of economic reports.
US Recession and Stock Market Performance During The Global Financial Crisis
S&P 500 Index, January 2007 - December 2010
The global financial crisis offers a lesson in the forward-looking nature of the stock market. The US recession spanned from December 2007 to May 2009, as indicated by the shaded area in the chart. But the official “in recession” announcement came in December 2008—a year after the recession had started. By then, stock prices had already dropped more than 40%, reflecting expectations of how the slowing economy would affect company profits. Although the recession ended in May 2009, the “end of recession” announcement came 16 months later (September 2010). US stocks had started rebounding before the recession was over and climbed through the official announcement.
The market is constantly processing new information, pricing in expectations for companies and the economy. Investors who look beyond after-the-fact headlines and stick to a plan may be better positioned for longterm success.
**The performance of the stock market is subject to many factors, including the overall state of the economy, individual company performance, and global events. It is important to note that past performance does not guarantee future results, and investing in the stock market carries a degree of risk. It is recommended that investors conduct thorough research and consult with a financial advisor before making any investment decisions.