Recession Fears in 2026: Historical Data Reveals Why Stocks to Invest in During a Recession Often Win Long-Term

The Economic Outlook Question

Most mainstream economists aren’t predicting a U.S. recession for 2026. J.P. Morgan Global Research pegs the odds at just 35%, while the Federal Reserve Bank of New York’s recession probability based on Treasury yield spreads sits even lower. Yet economic predictions aren’t guaranteed. What if the unexpected happens? Should investors continue buying stocks in such a scenario, or should they hold back and wait? The historical record provides some compelling answers.

A Decade of Decline Patterns (But With Nuance)

Since the S&P 500 took its modern 500-company form in March 1957, America has weathered 10 recessions. During recession years themselves, the picture looks bleak. The original 1957 downturn saw the index fall 11%. The 1973 oil crisis triggered a 19% drop. The 2008 financial crisis produced a catastrophic 41% decline in 2008 itself (though the S&P actually posted a modest 4% gain in 2007 when it began).

However, most recession years showed red. Exceptions appeared only when downturns either started late in the year or lasted just a few months—like 1980, when the index rebounded 24% despite an early recession, or 2020, when the COVID slump proved brief and the index finished up 16%.

The immediate takeaway seems clear: stock market declines accompany economic contractions. But there’s more to the story.

The Five-to-Ten Year Transformation

The real pattern emerges when investors expand their perspective beyond recession year returns. Historical data tells a striking story:

Performance Following Each Recession Start:

• August 1957: Five-year return +24%; Ten-year return +103%
• April 1960: Five-year return +56%; Ten-year return +59%
• December 1969: Five-year return -21%; Ten-year return +14%
• November 1973: Five-year return -1%; Ten-year return +64%
• January 1980: Five-year return +53%; Ten-year return +223%
• July 1981: Five-year return +90%; Ten-year return +193%
• July 1990: Five-year return +50%; Ten-year return +306%
• March 2001: Five-year return -17%; Ten-year return -25%
• December 2007: Five-year return -5%; Ten-year return +77%
• February 2020: Five-year return +309% (ongoing)

The numbers reveal something powerful: buying stocks to invest in during a recession typically produced substantial wealth creation within five years. Across these 10 instances, the average S&P 500 gain was approximately 54% by the five-year mark. Over ten years, the average climbed to roughly 113%—more than doubling an initial investment.

Only one period broke the mold: the 2001 recession, which arrived amid the dot-com bubble’s aftermath. Investors faced a decade-long struggle. Yet even this serves as an outlier, and the tech recovery that followed eventually created enormous wealth for patient holders.

The Strategic Implication for Long-Term Investors

The historical verdict is unambiguous for investors with a multi-year horizon: downturns create opportunity, not disaster. Whether the 2026 recession materializes or not becomes almost secondary to this insight. Stock market downturns have consistently preceded strong recoveries and sustained growth periods over the subsequent five-to-ten-year windows.

For those building an S&P 500 index fund position or constructing a diversified equity portfolio, the recession timing becomes far less critical than the commitment to staying invested. While economic conditions may worsen in 2026—or they may not—historical patterns suggest that investors who continue accumulating quality stocks to invest in during a recession typically emerge with significantly superior returns compared to those who attempted to time the market or sit on the sidelines.

The underlying principle remains unchanged: time in the market beats timing the market, especially when broader economic uncertainty creates temporary valuations that reward long-term conviction.