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Some Concerns of Investors Today
Using History as a Guide, Prato Capital counters media's guessing game on where the markets might be headed in their October Newsletter
Recessions and Effects on Market Returns
Jerome Powell, the Chair of the Federal Reserve, has been very direct with his messaging about continuing to raise interest rates in an attempt to decrease inflation back to near 2% and avoid a high inflation period similar to the 1970s and early 1980s. He also mentioned the possibility of the US economy entering a recession before inflation rates are brought down to the desired level.
Many investors are concerned about the impact a recession may cause on their portfolios. The table below shows the recessions in the US since the end of World War II with the returns of the S&P 500 before, during, and after the recessions. If we use history as a guide, market returns have been both positive and negative before and during recessions. But the 1-year and 3-year returns of the S&P 500 after a recession have shown a very strong trend of impressive returns.
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