Chart of the Day provides some perspective on stock market performance during a recessionary period.
The chart below illustrates the average performance since 1945 of the S&P 500 Index following the beginning of a recession (blue line). For comparison, the chart also presents the performance of the S&P 500 following the beginning of the last recession (which began March 2001 – gold line) and the current recession (which began December 2007 – red line).
“As the chart shows, the stock market has tended to decline for several months preceding and six months following the beginning of a recession. Stock market performance following the commencement of the last two recessions has been much more severe than average both in magnitude and duration,” said Chart of the Day.
The study is interesting but we are dealing with an extreme event, and “average” historal patterns unfortunately do not provide much guidance regarding a turning point for this particular situation.
Source: Chart of the Day, April 17, 2009.
