History Proves It’s an Ideal Time to Buy Stocks

Andy Snyder|April 19, 2022

This might be the most valuable thing you read all year.

If we’re right that a recession is coming (and we are), then the words ahead offer sage advice on where to put your money.

History doesn’t lie… and these facts are quite encouraging.

Sadly, many folks hear the word “recession” and immediately worry about the fate of their money.

At best, they pull back on their investments – putting less of their cash into the market.

At worst, they take their money out of the market altogether… often selling in the midst of a strong pullback and locking in losses.

Why that approach is wrong – very wrong – is a stern reminder that the stock market is not the economy. The market looks ahead, while the economy looks back.

Understand the nuances of this idea, and you’ll see that right now could be not just a good time to buy stocks… but an ideal time.

We did some digging for our dear readers. We wanted to show why we’re so bullish on stocks… yet so worried about the fate of the nation’s economy.

We’ve long bucked the trend and said a recession is imminent. The second half of the year, we said back in January, will feature an economy that’s smaller than it was in the first half of the year.

That means it’s time to buy stocks.

Rich Data

We went through nearly 70 years of data. In all, there have been 11 recessions since 1953. The average one lasted just shy of 12 months – accounting for about three straight quarters of shrinking GDP.

Throughout all of those periods, stocks lost an average of just 1%.

And even that number is skewed by the Great Recession, the longest and most severe of the lot.

Nearly half the slowdowns actually saw share prices rise. In 1953, for instance, stocks surged 18% during the recession. In 1960, they went up 17%. And, in perhaps the time period most similar to what we’re seeing today, stocks rose 13% during the recessions in 1980 and 1981.

It turns out, in fact, that a recession’s worst returns come the year before it starts, with almost all 11 downturns over the last seven decades showing a decline even while the economy was still growing.

The 12-month period before the official start of a recession – right about now, in our case – is the worst period. It has seen stocks drop by an average of 3%. And during the six months just prior to a recession, stocks have gone down an average of 2%.

Guess what… Over the last 180 days, stocks are down 2.5%.

Indeed, history is in for another rerun.

That’s great news.

It means stocks are almost certain to rise from here.

Time to Buy

During the six months after the end of a recession, stocks return an average of 7%.

Twelve months after the end of a downturn, they jump by 16%. And two years after the end of a recession, they’re up by an average of 20%.

In fact, folks wise enough to put some money into stocks at the start of a downturn saw a positive return within 12 months 91% of the time. Few other periods offer such strong odds of success.

So when you hear the dire tales of trouble… have no fear.

Take advantage of it and make some money.

Stocks are not the economy.

Now is the time to buy.