Investment insights from Capital Group
Recessions are painful, but expansions have been powerful
Sources: Capital Group, National Bureau of Economic Research (NBER), Refinitiv Datastream. Chart data is latest available as of 31/8/23 and shown on a logarithmic scale. The expansion that began in 2020 is still considered current as of 31/8/23 and is not included in the average expansion summary statistics. Since NBER announces recession start and end months, rather than exact dates, we have used month-end dates as a proxy for calculations of jobs added. Nearest quarter-end values used for GDP growth rates. Past results are not predictive of results in future periods.
Equities have typically peaked months before a recession, but can bounce back quickly
Sources: Capital Group, Federal Reserve Board, Haver Analytics, National Bureau of Economic Research, Standard & Poor's. Data reflects the average change in the S&P 500 Index and economic activity (using industrial production as a proxy) of all completed economic cycles from 1950 to 2022. The “cycle peak” refers to the highest level of economic activity in each cycle before the economy begins to contract. Both lines are indexed to 100 at each economic cycle peak and indexed to 0 “months before/after cycle peak” on the x-axis. A negative number (left of the cycle peak) reflects the average change in each line in the months leading up to the cycle peak. The positive numbers (right of the cycle peak) indicate the average changes after the cycle peak. Past results are not predictive of results in future periods.
Sources: Capital Group, Refinitiv Datastream. Reflects latest data available as of 31/8/22.
The likelihood of a recession rose sharply in recent months
Sources: Federal Reserve Bank of New York, Refnitiv Datastream. As of 31/7/23. Shaded bars represent US recessions as defined by the National Bureau of Economic Research.
Through 10 declines, some sectors have finished above the overall market
*In September 2018, the telecommunication services sector was renamed communication services, and its company composition was materially changed. The dividend yield shown is for the telecommunication services industry group, a subset of the newly constructed communication services sector. The communication services sector’s dividend yield was 0.8% as of 8/31/23.
Sources: Capital Group, FactSet. Includes the last 10 periods that the S&P 500 Index declined by more than 15% on a total return basis. Sector returns for 1987 are equally weighted, using index constituents from 1989, the earliest available data set. The 2022 bear market is still considered current as of 31/8/23 and is included in this analysis. Dividend yields are as of 31/8/23.
High-quality bonds have shown resilience when stock markets are unsettled
Sources: Bloomberg Index Services Ltd., RIMES, Standard & Poor’s. Dates shown for market corrections are based on price declines of 10% or more (without dividends reinvested) in the S&P 500 with at least 50% recovery persisting for more than one business day between declines. Includes all completed corrections between 1/1/10 and 31/8/23. Returns are based on total returns in USD. Past results are not predictive of results in future periods.
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Past results are not predictive of results in future periods. It is not possible to invest directly in an index, which is unmanaged. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.
Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.