Markets Don’t Wait for Official Announcements
A look at stock market performance and the US recession during the Global Financial Crisis.
Written by Patryk Dyjecinski

IFA and Founder of Clara Wealth

Some investors may worry about the stock market sinking after a recession is officially announced. But history shows that markets incorporate expectations ahead of economic reports.

• The global financial crisis offers a lesson in the forward-looking nature of the stock market. The US recession spanned from December 2007 to May 2009, as indicated by the shaded area in the chart.

• But the official “in recession” announcement came in December 2008— a year after the recession had started. By then, stock prices had already dropped more than 40%, reflecting expectations of how the slowing economy would affect company profits.

• Although the recession ended in May 2009, the “end of recession” announcement came 16 months later (September 2010).
US stocks had started rebounding before the recession was over and climbed through the official announcement.

The market is constantly processing new information, pricing in expectations for companies and the economy. Investors who look beyond after-the-fact headlines and stick to a plan may be better positioned for long-term success.

Please get in touch at contact@clarawealth.co.uk or on 0207 097 4968 if you wish to discuss your investments or have any other questions. You can read about our evidence based investing philosophy here.

Past performance is not a reliable indicator of future performance. The value of investments may go down as well as up and you may get back less than you invest.