Market returns through a century of recessions

It came as no surprise this week when the Federal Government announced that Australia had officially fallen into recession for the first time in decades.

This news was delivered within a week of the US stock market returning to all-time highs, despite historic levels of job losses in that country as a result of the pandemic.

Since markets constantly react to economic expectations, stock returns can be positive even during a recession. This interactive exhibit shows the power of markets through a century of US recessions.

To put it another way: there is a difference between Main Street and what happens on Wall Street.

Markets around the world have often rewarded investors even when economic activity has slowed. This is an important lesson on the forward-looking nature of markets, highlighting how current market prices reflect market participants’ collective expectations for the future.