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Pricing recessions

May 20, 2022

In case you believe in an imminent economic recession, here is what recessions did on average to US equity markets since WWII. S&P 500 contracted by a median 24% from peak to trough in a recession over the last 75 years. In 2022 alone, the equity index is down 18.2% y-t-d as of yesterday’s close. We conclude that, in case 2022 would indeed turn up as a recession year, this potential economic contraction is not fully priced in yet by investors.

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