Looking at Bond Market Performance During Historical Recessions
May 3, 2023
Welcome to Wealth Enhancement & Preservation’s Market Minute, where we get to update you on everything that happened in the financial markets this week. My name is Darrin Cohen, and I am the CEO of Wealth E&P.
Last week was a good week for the markets, with all three indices up about 1%. There was a little bit of a slow start this week with everything being down just slightly, but hopefully we’ll trend back up for the rest of the week. Today I want to look at how the bond market is historically impacted by recessions. We’ve talked about if we’re in a recession or heading toward a recession, as well as how that affects the stock market. You can see on the BlackRock chart below the last seven recessions going back to 1972. On the bottom, you can see that stocks tend to go down slightly during a recession, except for 2008 and 2009 with a steep decline.
However, bond markets tend to do well across the board with short-term, long-term, and medium-term bonds during recessions. This is because, during a recession, we generally see interest rates decline to try and boost the economy back up. When interest rates decline, bonds go up in value, especially the longer-term bonds. High-yield bonds do stand out as slightly different; even though they’re bonds, they tend to be correlated to the stock market and see more volatility.
If you have any questions about this topic, your portfolio, the economy, or if you want a risk profile or a retirement projection, please feel free to reach out, visit www.wealthep.com, or give us a call at (678)-739-0175. Otherwise, stay tuned for our Market Minute next week!
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.