Bear Markets, Then and Now

Posted by: Ben Steverman on June 2, 2008

How does this recession, and the stock market reaction to it, compare with previous slowdowns? From Citigroup (C), by way of Schroder Investment Management, the results of a study of nine recessions since 1953…
Length of recession:
Best case — 126 trading days
Average — 216
Worst case — 337

Trading days into recession that trough occurred (i.e. stocks hit bottom):
Best case — 30
Average — 108
Worst case — 261

Decline in the equity market from peak to trough
Best case — -13.9%
Average — -25.6%
Worst case — -48.2%

So what about this recession?
We don’t know for sure if it is a recession — and recently many economists have gotten more optimistic that this is just a slowdown. But if it is, many agree the economy stepped on the brakes in December. So far, the market’s trough was on March 10.

By my calculation, from the beginning of December to March 10, there were 67 trading days. From its peak in October to March, the S&P 500 fell 17.9%.

If the U.S. is or was in recession, and if the March 10th lows hold, this would be one of the better — though not the best — stock market performances during a recession in the last 55 years.

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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