On The Returns of S&P 500 During Recessions

Recessions are generally negative for equity returns. During recessions, economic contraction leads to lower production and consumption leading to hurt sales for companies. Currently the US economy is holding up but nobody knows if it will slip into a recession later this year or early next year. As a consumption-based economy, the US consumer hasn’t slowed down spending.

From an investor perspective, it is important to keep an eye on the direction of the economy. One report by Schroders showed that the S&P 500 generates a negative return during recessions. However in the late stages of a recession, the index yields a positive return as shown below:

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Source: Ten key themes for 2023 and beyond, Schroders

For long-term investors recessions are bad. Since it is almost impossible to predict when a recession would end it is highly unlikely for anyone to make a profit with stocks while the economy is in recession. Most investors are likely to ride out the recession though they may not add new funds to the market.

Related ETFs:

  1. SPDR S&P 500 ETF (SPY)
  2. iShares Core S&P 500 ETF (IVV)
  3. Vanguard S&P 500 ETF(VOO)
  4. SPDR Portfolio S&P 500 ETF  (SPLG)

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The Key Semiconductor Manufacturing Countries: Chart

Semiconductor manufacturing is one of the highly technical and complex process in the world. Very few nations have the capability to make them. In fact, according to a report by Matrade agency of the Malaysian government, just 11 countries manufacture them. Out of these 6 of them are Asian countries as shown in the graphic below with Malaysia being one of them.

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Source: Matrade

It is not surprising that China is one of the major semiconductor makers.

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The Historical Average Annual Returns of Australian Stock Market From 1900 To 2023

The Australian stock market as measured by the The ASX All Ords index has returned 13% per year for the duration from 1900 to 2023 according to the updated chart from ASX. This return indicates total return which includes dividends reinvested. Of course, no investor invests for such a long term. However the key point to remember from such charts is the importance of investing for the long-term which can mean different time for investors depending on their risk tolerance. It can be as low as 5 years to a few decades.

Australian stocks have generated positive returns in 100 of the 124 years as shown in the chart below. To put it another way that is 81% of the time from 1900 to 2023.

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Source: ASX via Why I’m a perma-bull on stocks by James Gruber, Firstlinks

James also noted another fascinating fact in the above article. If an investor holds stocks for seven years or longer, the chances of earning a positive return in Australia and other global markets is nearly 100%.

The following table shows the Annual Total Returns of Australian Stock Market from 1900 to 2023:

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Source: Market Index

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Disclosure: No positions