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Chart of the Week

Weekly chart using economic data to address timely market topics from the Wells Fargo Investment Institute Global Investment Strategy team.

May 23, 2023

Austin Pickle, Investment Strategy Analyst

Recession storm clouds gather — but hope on the horizon

The chart plots the average S&P 500 Index performance around the end of every recession since 1948. A dashed vertical line at time '0' indicates the end of the recession. The chart illustrates that stocks typically bottom about 4 months prior to the end of the recession before beginning a sustainable rally.Sources: Bloomberg and Wells Fargo Investment Institute. Indexed to 100 as of the end of every recession since 1948. Data as of May 2, 2023. Past performance does not guarantee future results. An index is unmanaged and not available for direct investment. Please see end of report for recession end dates and index definitions. Excerpted from Investment Strategy (May 8, 2023)

Stocks have historically bottomed, on average, four months before recession end.

The chart shows the average performance of the S&P 500 Index before and after recessions since 1948. On average, the S&P 500 Index has bottomed about four months before the end of a recession. As the economy weakens, our current preference for quality and more defensive positioning in equity portfolios remains in effect.

Once we believe the recession appears to be fully priced in to market valuations, however, we likely will begin to position for the early cycle recovery we see emerging in 2024. In 2024, we foresee the end of the recession, a global economic rebound, and easing credit conditions — in short, an ideal environment for risk assets.

What it may mean for investors

While we believe it is important to plan for an early-cycle 2024 recovery, it is too early to position for that eventuality. We believe risks in the system are building and that recession storm clouds are gathering. We believe it unlikely that equities will surge meaningfully higher without a period of volatility first.

Risk Considerations

Forecasts are not guaranteed and based on certain assumptions and on views of market and economic conditions which are subject to change.

Each asset class has its own risk and return characteristics. The level of risk associated with a particular investment or asset class generally correlates with the level of return the investment or asset class might achieve. Stock markets, especially foreign markets, are volatile. Stock values may fluctuate in response to general economic and market conditions, the prospects of individual companies, and industry sectors. Foreign investing has additional risks including those associated with currency fluctuation, political and economic instability, and different accounting standards.


S&P 500 Index is a market capitalization-weighted index composed of 500 widely held common stocks that is generally considered representative of the US stock market.

An index is unmanaged and not available for direct investment.

Chart recession end dates: 10/31/1949, 5/31/1954, 4/30/1958, 2/28/1961, 11/30/1970, 3/31/1975, 7/31/1980, 11/30/1982, 3/31/1991, 11/30/2001, 6/30/2009, 4/30/2020.

General Disclosures

Global Investment Strategy (GIS) is a division of Wells Fargo Investment Institute, Inc. (WFII). WFII is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.

The information in this report was prepared by Global Investment Strategy. Opinions represent GIS’ opinion as of the date of this report and are for general information purposes only and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally. GIS does not undertake to advise you of any change in its opinions or the information contained in this report. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.

The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability or best interest analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. The material contained herein has been prepared from sources and data we believe to be reliable but we make no guarantee to its accuracy or completeness.

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