A much-talked-about U.S. recession has yet to arrive after more than a year of speculation, and now chief market strategist Joseph Quinlan at Bank of America’s wealth unit spells out why investors shouldn’t fret even if one finally comes.
Across the 12 U.S. recessions that have occurred after 1945, the S&P 500 managed to start bouncing back from a trough even while the economy was still technically mired in a downturn, he said. From the time that stocks hit that trough, the index has seen three-month average returns of 19.7%, six-month average returns of 28%, and 12-month returns of 43.7%.
In other words, recessions “can represent favorable buying opportunities for equities.” He describes such economic downturns as “periods of reset/revitalization that often the leave the economy stronger at the other end.” And history shows that “rolling recessions” — or periodic soft patches in some sectors and not others — tend to be more common than nationwide downturns.