Well, it’s finally official. According to a Wall Street Journal economic-forecasting survey, conducted from March 7 to 11, a majority of the economists polled said that the U.S. has finally slipped into recession. This marks a huge change from the last poll conducted only 5 weeks before.
To add to the evidence, new data shows that retail sales dropped .6% in February, the result of the sub-prime credit crisis, falling housing prices and increased prices for staples such as food and gasoline.
According to Ned Davis Research and their study, 10 post-war recessions have lasted an average of 10 months. At the same time, during these recessions, the S&P 500 has seen the following returns:
Year Leading to Recession: -4.3%
Six Months After Recession Begins -4.8 %
One Year After Recession Begins +3.2%
Year After Recession Ends +14.4%
As you can see, the pain in the markets is short-lived and the recoveries are usually robust. Remember these are just averages and each recession has its own characteristics. Let’s hope this is a mild one with an ever better rebound!!!