Stock Market Returns During Recessions: Insights from Joshua Krafchick

Recessions can strike fear into the hearts of investors, but understanding how the stock market behaves during these times can be empowering. Welcome to this blog post, where we’ll dive into average stock market returns during recessions, the factors that shape market behavior, and the strategies you can employ to navigate the stock market during challenging economic times.

Average Stock Market Returns during Recessions:

Determining the average stock market return during a recession is no easy feat, as it depends on several factors. Let’s take a closer look at a study that I found very interesting.

A study conducted by esteemed professors Eugene Fama and Kenneth French analyzed U.S. recessions from 1948 to 2009. Their findings revealed that, on average, the stock market returned approximately -1.4% per year during these periods. This number provides a general sense of market performance, but remember, it’s essential to comprehend its limitations.

Limitations and Variations:

Remember, the average return encompasses all recessions during that time frame, failing to capture the unique characteristics of each one. Some recessions witnessed significant declines, while others had a milder impact on the stock market.

Additionally, a multitude of factors influences the stock market during recessions, including government policies, economic measures, and global conditions. Thus, it’s vital not to rely solely on historical averages when making investment decisions.

The Importance of Diversification and Long-Term Investing:

During uncertain economic times, emphasize the significance of diversification and adopting a long-term perspective. By diversifying your investment portfolio, you spread your investments across different assets, industries, and regions. This prudent strategy helps mitigate risks, as certain sectors or assets may underperform while others outshine, creating balance in your overall returns.

Furthermore, I would encourage you to embrace a long-term mindset when investing in the stock market. By weathering short-term market fluctuations, you position yourself to reap the rewards of positive long-term growth. History has shown that the stock market tends to rebound and generate returns over time, even after recessions. Stay committed to your long-term goals and embrace the power of compounding.

Risk Management and Professional Guidance:

To excel in uncertain times, you need to master the art of risk management. Regularly assess and adjust your investment strategy based on your risk tolerance, financial goals, and time horizon. Seeking advice from a trusted financial advisor adds an extra layer of support, providing personalized guidance tailored to your unique circumstances.

Moreover, stay informed about economic trends, market conditions, and significant policy changes that may impact the stock market. This knowledge empowers you to make informed decisions and navigate the stock market during challenging times.

As you embark on your finance journey, remember that while the average stock market return during a recession offers some insight, each recession possesses its own character. Past performance does not guarantee future results, and the stock market is influenced by a myriad of factors during recessions.

To master the stock market during challenging economic times: diversify your investments, adopt a long-term perspective, and practice diligent risk management. By spreading your investments, thinking long-term, and seeking professional guidance, you position yourself for financial success.


“Success is doing what you love and being able to impact the lives of millions of people in a positive way.”

So, keep studying, learning, and transforming your financial future. Together, we can create the life we desire.



Your Guide,

Joshua Krafchick | “Unconventional” Money Guy





Fama, E. F., & French, K. R. (2010). The equity premium and the business cycle: The role of time-varying rare disaster risks. Journal of Finance, 65(1), 13-52.

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