Economic recession is something that’s re-entered conversations with clients this year.
So in Ireland, we had a brief recession at the start of the year, which we have exited.
Simply put, when a recession happens company revenues are down and that means their valuations reduce and across the board, that’ll mean a drop in the stock markets.
The below graph shows recessions and equity market performance – The context shows the long-term positive trend but the drops are not pleasant!
From the point of view of pension funds and investment funds, the most influential market is the US market – It’s the largest economy in the world and it’s the largest stock market in the world.
Historically speaking, stock markets drop in the first 6 months of a recession, they rebound after that and typically will recover well ahead of the economy.
Drop-offs can be sharp, they can be approximately 20 to 30%, but it is temporary.
For long-term investors, it’s something that needs to ride out the storm as such and maybe you can avail of lower valuations if possible.
If you are a short or long-term investor and need advice or assistance on your journey, feel free to get in touch, and let’s start a conversation today!