Recessions: keeping your perspective

Recessions are a natural part of the economy’s ebb and flow. In fact, since 1931 we’ve faced 14 of them (including the current one). While we can’t predict what will happen next — and can’t count on history repeating itself — we can learn from past declines.

Look at the chart below to see the timing and duration of the recessions, and how the stock market (as measured by Standard & Poor’s 500 Composite Index) responded.

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The following table shows how the market rebounded six months after some negative news during three downturns. Do you remember these headlines?

News headlines S&P 500 cumulative price returns*
Six months later Five years later
June 1982
  • Overdue mortgages and foreclosures set a record in first quarter, survey shows
  • Layoffs are set for over 5,000 by four companies
  • Record level of home foreclosures is bringing grief to many families
  • U.S. car sales plummeted 23% for mid-June
6/30/82 - 12/31/82
+ 28%
6/30/82 - 6/30/87
+ 177%
October 1990
  • GE plans to lay off up to 500 workers; sluggish sales of major appliances cited
  • Weakening economy threatens equities
  • NYSE traders may face one of the worst years
  • Business economists survey reports more gloom, doom
  • Markets get their first whiff of deflation since last recession: values eroding for wide range of investments
  • Gulf War might not aid U.S. economy
10/31/90 - 4/30/91
+23%
10/31/90 - 10/31/95
+91%
March 2003
  • Jobless rate rises to 5.8%
  • Oil jumps to a 12-year high, as supply falls amid war fear
  • First-half growth estimates fade — economists cite concerns about war, energy prices, poor corporate outlooks
3/31/03 - 9/30/03
+17%
3/31/03 - 3/31/08
+56%
Source: News headlines from The Wall Street Journal
*Returns do not include dividends.

Keeping a positive attitude during a downturn is never easy, but history has shown that the market regularly goes through up and down cycles. For help with decisions related to your retirement goals and investments, speak with your plan’s financial professional or contact your own.

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Investing in a volatile market

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