The Capital Group recently released a study conducted by Ned Davis Research showing that the Standard & Poor’s 500 Composite Index has tended to bounce back quickly after bottoming out during the past 10 recessions. According to the study, the S&P 500 generated positive results in nearly every 3-, 6-, 9- and 12-month period following its low point during the last 10 recessions. The index generated a 24% mean return six months after bottoming and 32% a year later.
While no one can predict a market bottom, investors who maintained a long-term perspective and held onto their investments stood to benefit. Investors who sold stock mutual funds to avoid the pain of a recession and reinvested later could have missed most of the subsequent recovery. The S&P 500 rose more than 15% on average three months after recession low points. Please click here for a copy of the report.