• Products

    World Bond Fund Monthly Positioning & Outlook

    View Now >

  • Insights

    Human-Centric Investing Podcast

    Listen to Latest Episode >

  • Practice Management

    Applied Insights Team

    Learn More >

  • Resources

    Tax Center

    View Now >

  • About Us

    Human-Centric Investing

    Learn More >

number 1

What’s in a name?: A recession is an extended period of declining economic output, wages, employment, industrial production, and retail sales.1

number2

A recession is not the same as a bear market: The economy is not the stock market. The stock market is based on expectations for the economy in six to 12 months, so stocks can move up during a recession—or down when the economy’s expanding. By contrast, economic recessions or expansions may not be identified until months after they begin.

number 3

Internal versus external shocks: Recessions can be started by imbalances in the economy, such as a financial crisis; these imbalances usually must stabilize for the recession to end. They can also be started by the economy’s reaction to external shocks, such as a pandemic or a terrorist attack.

number 4

The customer is always right: Consumer spending accounts for about 70% of US economic activity, which is why there’s so much concern that social distancing and quarantine measures due to the COVID-19 pandemic will have a negative impact on the US economy.2

number 5

What goes up must come down: Recessions and expansions are a normal part of the economic cycle. There have been 12 recessions since 1945, occurring about five years apart on average.3

number 6

We grow more than we contract: On average, US recessions have lasted about 11 months. The Great Recession (2007 – 2009) that followed the global financial crisis was the longest period of economic contraction since the Great Depression: 18 months. Conversely, the expansion that followed the Great Recession was the longest on record, lasting more than 10 years.

number 7

Connected, but not always in sync: Even in today’s interconnected world, individual countries can enter recessions without taking the global economy down with them. According to the International Monetary Fund, there have been only four global recessions since 1960 (compared to eight in the US in the same time frame).4

number8

Bad begets good: The Federal Reserve Bank of Cleveland found that the worse a recession, the stronger the expansion that followed it. They didn’t find a connection between the length of an economic expansion and the severity of the recession that followed it.5

number 9

Not all stocks are created equal: Recessions impact different sectors of the economy, and the stock market, differently. The stocks of some industries are considered “cyclical” and are more impacted by the state of the economy (think discretionary purchases such as travel or a new car), while others are necessities regardless of economic cycle (think utilities).

number 10

Stocks can grow when the economy contracts: Although bear markets sometimes coincide with recessions, stocks actually produced positive returns during seven of the 12 recessions since 1945. In fact, the S&P 500 Index returned 4.76% on average through those recessions (see chart below).

FIGURE 1

Stocks Have Posted Positive Returns During Recessions More Often Than Not

S&P 500 Index Performance During Recessions Since 1945

Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. For illustrative purposes only. Data sources: Morningstar, Ned Davis Research, and Hartford Funds, 3/20. 

Talk to your financial professional to see how changes in the economy could impact your portfolio. 

 

1  The National Bureau of Economic Research (NBER) is the organization responsible for identifying economic cycles. The definition of a recession used to be two consecutive quarters of decline in real GDP, but is now more nuanced: Extended diminishing activity in real GDP (an inflation-adjusted measurement of the value of all goods and services produced by an economy), real income (inflation-adjusted measurement of how much money an individual makes), employment, industrial production, and wholesale-retail sales output.

2  Personal Consumption Expenditures/Gross Domestic Product, Federal Reserve Bank of St. Louis, as of Q42019

3 Data source for recession statistics: NBER unless otherwise noted.

4 “Collapse and Revival: Understanding Global Recessions and Recoveries,” Ayhan Kose; Marco Terrones, IMF 2015

5 “Do longer expansions lead to more severe recessions? No, say Cleveland Fed researchers,” Federal Reserve Bank of Cleveland, January 2019

Important Risks: Investing involves risk, including the possible loss of principal. 

CCWP079      216930

 

The material on this site is for informational and educational purposes only. The material should not be considered tax or legal advice and is not to be relied on as a forecast. The material is also not a recommendation or advice regarding any particular security, strategy or product. Hartford Funds does not represent that any products or strategies discussed are appropriate for any particular investor so investors should seek their own professional advice before investing. Hartford Funds does not serve as a fiduciary. Content is current as of the publication date or date indicated, and may be superseded by subsequent market and economic conditions.

Investing involves risk, including the possible loss of principal. Investors should carefully consider a fund's investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund, ETF or closed-end interval fund prospectus or summary prospectus, which can be obtained from a financial professional and should be read carefully before investing.

Mutual funds and the closed-end interval fund are distributed by Hartford Funds Distributors, LLC (HFD), Member FINRA/SIPC. Exchange-traded products are distributed by ALPS Distributors, Inc. (ALPS). Advisory services may be provided by Hartford Funds Management Company, LLC (HFMC) or its wholly owned subsidiary, Lattice Strategies LLC (Lattice). Certain funds are sub-advised by Wellington Management Company LLP and/or Schroder Investment Management North America Inc. Schroder Investment Management North America Ltd. serves as a secondary sub-adviser to certain funds. Hartford Funds refers to Hartford Funds Management Group, Inc. and its subsidiaries, including HFD, HFMC, and Lattice, which are not affiliated with any sub-adviser or ALPS. The funds and other products referred to on this Site may be offered and sold only to persons in the United States and its territories.

© Copyright 2021 Hartford Funds Management Group, Inc. All Rights Reserved. Not FDIC Insured | No Bank Guarantee | May Lose Value