Sunday, April 19, 2009

Market Signaling Better Economic Environment Ahead?

The Chart of the Day charting service published a chart last week noting market performance two months before the start of a recession and the period following a recession. As noted on the chart, the stock market (S&P 500 Index) tends to begin its decline several months before the onset of a recession. The chart illustrates the average performance of the S&P 500 since 1945 following the beginning of a recession (blue line). The extend of the market's decline following the start of the recession for the 2001 recession and the most recent recession that began in December 2007 has been more severe.

market performance before and after recessionsSource: Chart of the Day

I am not sure I would go all in based on this chart, but an investor should note the market will anticipate an improving economic environment.

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