MacroPublished · S&P 500 to Nov 6, 2026; FRED to Sep 2026

Stocks did best after the economy looked worst

Since 1967, the S&P 500 rose 12.5% on average in the 12 months after a Slowdown month and 4.9% after an Overheating one, by the regime known at the time. And the second half of a recession was up 12 times in 15.

Next 12 months after a Slowdown month
+12.5%
After Stagflation risk
+10.7%
After Goldilocks
+9.9%
Recession second halves up
12 of 15
Low, median point
58% through

What we found

We labelled every month since 1967 with the regime the /macro page shows (growth above or below trend, inflation rising or easing), using the figures as first published where they exist. Over the next 12 months the S&P 500 rose 12.5% on average after a Slowdown, 10.7% after Stagflation risk, 9.9% after Goldilocks and 4.9% after Overheating, which was followed by a lower index a year later 34% of the time.

The differences aren’t reliable (p = 0.16), and on SPY since 1993 Goldilocks came first. What holds is that the “bad” regimes weren’t bad times to own stocks: markets look ahead, and by the time the data shows a slowdown, prices have usually already fallen.

Recessions show the same thing. In 15 NBER recessions since 1929, the market’s low came a median 58% of the way through, and the second half, from the midpoint to the end, was up 12 times, by a median 12%.

Box plots of the S&P 500’s return over the next 12 months in each macro regime since 1967, Slowdown highest and Overheating lowest; beside them, the return from the midpoint to the end of each recession since 1929, up in 12 of 15.

The full results

S&P 500 over the next 12 months: middle half, 90% range and average
−40%−20%0%+20%+40%Slowdown · average +12%, median +14%, middle half +4% to +22%, 90% −18% to +38%+12%SlowdownStagflation risk · average +11%, median +14%, middle half +6% to +21%, 90% −26% to +32%+11%Stagflation riskGoldilocks · average +10%, median +10%, middle half −1% to +20%, 90% −12% to +32%+10%GoldilocksOverheating · average +5%, median +7%, middle half −6% to +14%, 90% −21% to +29%+5%Overheating
S&P 500 over the next 12 months, by regime, 1967–2026
RegimeMonthsAverageMedianWorst 5%DownAverage over T-bills
Slowdown171+12.5%+14.0%−18%19%+8.4%
Stagflation risk118+10.7%+13.6%−26%17%+6.2%
Goldilocks167+9.9%+9.9%−12%26%+4.9%
Overheating196+4.9%+6.6%−21%34%−0.8%

Prices only. Are the averages different? p = 0.16 (Newey–West), so not reliably. Worst 5%: the 5th percentile.

Average return by horizon
  • 1 month
  • 3 months
  • 12 months
0%+5%+10%+15%Slowdown · 1 month: +1.2%+1.2%Slowdown · 3 months: +3.1%+3.1%Slowdown · 12 months: +12.5%+12.5%Stagflation risk · 1 month: +0.6%+0.6%Stagflation risk · 3 months: +1.7%+1.7%Stagflation risk · 12 months: +10.7%+10.7%Goldilocks · 1 month: +1.1%+1.1%Goldilocks · 3 months: +3.4%+3.4%Goldilocks · 12 months: +9.9%+9.9%Overheating · 1 month: +0.3%+0.3%Overheating · 3 months: +0.8%+0.8%Overheating · 12 months: +4.9%+4.9%SlowdownStagflation riskGoldilocksOverheating
Average return by horizon
Regime1 month3 months12 monthsSPY with dividends, 12 months (1993–)
Slowdown+1.2%+3.1%+12.5%+13.9%
Stagflation risk+0.6%+1.7%+10.7%+9.6%
Goldilocks+1.1%+3.4%+9.9%+17.3%
Overheating+0.3%+0.8%+4.9%+9.3%

p-values that all four are equal: 1 month 0.10, 3 months 0.01, 12 months 0.16; SPY 0.09.

Each recession, first half and second half
  • Start to midpoint
  • Midpoint to end
1929–331929–33 · Start to midpoint: −57%−57%1929–33 · Midpoint to end: −57%−57%1937–381937–38 · Start to midpoint: −33%−33%1937–38 · Midpoint to end: +6%+6%19451945 · Start to midpoint: +4%+4%1945 · Midpoint to end: +12%+12%1948–491948–49 · Start to midpoint: +1%+1%1948–49 · Midpoint to end: +7%+7%1953–541953–54 · Start to midpoint: +0%+0%1953–54 · Midpoint to end: +18%+18%1957–581957–58 · Start to midpoint: −12%−12%1957–58 · Midpoint to end: +10%+10%1960–611960–61 · Start to midpoint: −3%−3%1960–61 · Midpoint to end: +21%+21%19701970 · Start to midpoint: −17%−17%1970 · Midpoint to end: +15%+15%1973–751973–75 · Start to midpoint: −17%−17%1973–75 · Midpoint to end: +5%+5%19801980 · Start to midpoint: −8%−8%1980 · Midpoint to end: +15%+15%1981–821981–82 · Start to midpoint: −13%−13%1981–82 · Midpoint to end: +22%+22%1990–911990–91 · Start to midpoint: −10%−10%1990–91 · Midpoint to end: +16%+16%20012001 · Start to midpoint: +4%+4%2001 · Midpoint to end: −6%−6%2008–092008–09 · Start to midpoint: −21%−21%2008–09 · Midpoint to end: −21%−21%20202020 · Start to midpoint: −13%−13%2020 · Midpoint to end: +13%+13%
S&P 500 through each recession since 1929 (15 rows)
RecessionMonthsMarket lowStart to midpointMidpoint to endYear after
Sep 1929 – Mar 19334306.01.1932−57%−57%+82%
Jun 1937 – Jun 19381303.31.1938−33%+6%−6%
Mar 1945 – Oct 1945803.26.1945+4%+12%−11%
Dec 1948 – Oct 19491106.13.1949+1%+7%+22%
Aug 1953 – May 19541009.14.1953+0%+18%+30%
Sep 1957 – Apr 1958810.22.1957−12%+10%+33%
May 1960 – Feb 19611010.25.1960−3%+21%+10%
Jan 1970 – Nov 19701105.26.1970−17%+15%+8%
Dec 1973 – Mar 19751610.03.1974−17%+5%+23%
Feb 1980 – Jul 1980603.27.1980−8%+15%+8%
Aug 1981 – Nov 19821608.12.1982−13%+22%+20%
Aug 1990 – Mar 1991810.11.1990−10%+16%+8%
Apr 2001 – Nov 2001809.21.2001+4%−6%−18%
Jan 2008 – Jun 20091803.09.2009−21%−21%+12%
Mar 2020 – Apr 2020203.23.2020−13%+13%+44%

NBER dates; prices only. The low within the recession came a median 58% of the way through; midpoint to end was up 12 times in 15.

Why bad news came before good returns

Stock prices move on what investors expect, and the economic data describes what already happened, a month or two late. By the time activity is clearly below trend, the market has usually fallen, and the recovery often starts while the data still looks weak. Overheating, the regime that sounds best for profits, came with the lowest returns that followed.

The regimes did not reliably separate returns, so this is no timing signal: since 1993 Goldilocks led. What the data rules out is the instinct to sell when the regime turns bad.

Inside recessions

In 15 recessions since 1929, the low inside the recession came a median 58% of the way through, and the market was higher at the end than at the midpoint 12 times. The exceptions were 1929–33, 2001 and 2008–09, when the market kept falling into the recession’s final months.

How it was measured

  • Regime: the Chicago Fed National Activity Index (three-month average, CFNAIMA3) above or below zero, and the six-month change in core PCE inflation, both from FRED. First estimates come from ALFRED where they exist (activity from 2011, inflation from 2000); revised data before that.
  • Returns are measured from the month-end after both numbers were published, so no regime is used before it was known. S&P 500 price returns (^GSPC); averages over T-bills are in the tables.
  • Newey–West standard errors for the overlapping 12-month returns.

Caveats

  • Four regimes, three horizons and two price series make many comparisons, and none of the differences clears a strict threshold.
  • NBER dates recessions after the fact, so the recession halves could not have been traded as they happened.

Questions

How do stocks do in a slowdown?
Better than you might expect. Since 1967, the S&P 500 rose 12.5% on average in the 12 months after a month when growth was below trend and inflation easing, against 4.9% after Overheating months.
Do stocks go up during a recession?
Often in the second half. In 15 NBER recessions since 1929, the S&P 500 rose from the recession’s midpoint to its end 12 times, by a median 12%.
Can you time the market with the economy?
Not reliably. The differences between regimes were not statistically significant (p = 0.16), and on SPY since 1993 the order changed.

More research

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Historical analysis. Past performance does not guarantee future results. Not investment advice. Published Nov 2026. Data: S&P 500 to Nov 6, 2026; FRED to Sep 2026.