Long Term Investors, Don’t Let a Recession Faze You
MODERNIST’S ASSET CLASS INVESTING PORTFOLIOS ARE STRATEGICALLY INVESTED WITH A FOCUS ON LONG-TERM PERFORMANCE OBJECTIVES. PORTFOLIO ALLOCATIONS AND INVESTMENTS ARE NOT ADJUSTED IN RESPONSE TO MARKET NEWS OR ECONOMIC EVENTS; HOWEVER, OUR INVESTMENT COMMITTEE EVALUATES AND REPORTS ON MARKET AND ECONOMIC CONDITIONS TO PROVIDE OUR INVESTORS WITH PERSPECTIVE AND TO PUT PORTFOLIO PERFORMANCE IN PROPER CONTEXT.
Investors may be tempted to abandon equities when there is a heightened risk of a recession. But research has shown that stock prices incorporate these expectations and generally fall in value before a recession even begins. As this graph shows:
In 12 of the 16 recessions in the US over the past century, stock returns were positive two years after the recession began.
The average annualized return two years after the onset of these 16 recessions was 8.8%.
A $10,000 investment at the peak of the business cycle would have grown to $12,145 after two years on average.
As evidence-based investors, we know that a history of positive average performance following a recession can be a comfort for concerned investors. Remember the big picture, both market-evidence and the vision embedded in your financial plan!
