Analyzing S&P 500 Performance During Recessions Since 1975

October 2024, By AlternativeSoft

The S&P500 performance during recessions offers insights for investors navigating uncertain times. Historically, the index has delivered an average annualized return of 9.08% since Feb 1975 to Sep 2024, however, during recessionary periods, this performance tends to vary significantly across different recessions.

Recently, the Sahm Rule Recession Indicator [1] was triggered, signaling a potential US recession on the horizon. This indicator, which activates when the three-month average of U.S. unemployment rises by 0.50 percentage points or more from its lowest point over the past year, has previously foreshadowed significant economic events like the COVID-19-induced recession in 2020, the 2008 financial crisis, and the dot-com bubble.

Our analysis highlights the importance of understanding these differences. While the S&P 500's expected return over 12 months following a recession averaged 8.56%, when the COVID-19 recession is excluded, this figure turns negative at -0.47. We excluded the COVID-19 period from the recession analysis because the recovery was primarily driven by government stimulus.

S&P 500 Performance Analysis

To explore the S&P 500's performance during economic crises, we conducted an analysis of historical data spanning from February 1975 to September 2024. We imported the Sahm Rule recession indicator data into AlternativeSoft database and utilized our conditional statistics feature to compare two periods: recessions period vs full period. Our analysis revealed the following metrics:

Table 1: Returns During Historical Recessions Since Feb 1975 vs Full Period Return

Source: AlternativeSoft

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