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Stock market ≠ economy

| May 25, 2023

Are we heading toward a recession? Many people think so, worried about the effect of rapid interest rate hikes by the Federal Reserve.

But a stumbling economy doesn’t always cause sagging stock prices. In fact, the S&P 500 has actually gained ground during 5 of the past 11 recessions, as illustrated by this chart from Lincoln Financial Group.

What’s more, market returns have usually been strong in the years following a recession – up 16% on average a year later, up 31% three years later and up 56% five years later.

A couple of caveats:

  • Recoveries aren’t always so rosy, as we saw at the turn of the century. S&P 500 returns were negative in the year after the 2001 recession and barely positive three years later.
  • The past doesn’t predict the future.

But these numbers do supply a reminder that the stock market often looks past today’s problems and invests in tomorrow’s potential. 

The views stated in this commentary are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.