The S&P 500 hit its financial-crisis closing low on March 9, 2009. The US economy reached its trough in June. The US unemployment rate peaked that October.
Three turning points. If you were waiting for “the recovery,” which date would you use?
Each measures something different. Stocks began recovering before broad economic activity; unemployment took longer to fall. The economic turn was not confirmed until the next year. A date you can circle in hindsight is not a signal you had at the time.
What a US recession means
Within the business cycle, a recession is a significant decline that spreads across the economy and persists. One struggling industry does not settle the question.
The National Bureau of Economic Research (NBER) is a private research organization, independent of government. Its Business Cycle Dating Committee identifies US economic peaks and troughs. An announcement puts a date on the downturn; the downturn itself is already happening or over.
NBER weighs depth, diffusion and duration: how far activity falls, how widely the decline spreads and how long it lasts. Two consecutive quarters of falling real GDP are a familiar shortcut. They are not NBER's rule.
These are judgments, not three fixed cutoffs. The February–April 2020 downturn lasted just two months from peak to trough. Its exceptional depth and breadth outweighed its brevity. A short recession can still be a severe recession.
Dating happens after the turn
The committee examines employment, inflation-adjusted income, production, sales and other measures. It waits for enough evidence, including revisions to earlier data, to distinguish a lasting turn from a temporary bounce. Its job is to establish what happened, not to forecast the next turn.
On September 20, 2010, NBER confirmed that the economy had reached its trough in June 2009. That trough ended the contraction following the December 2007 peak.
June 2009 is the economic reference month: the month being described. September 20, 2010 is the announcement date: when the committee made its conclusion public.
The gap was 15 calendar months: 12 from June 2009 to June 2010, plus 3 to September. Confirmation arrived long after the recovery began.
When NBER counts recession months, it starts with the month after the peak and includes the trough month. For this episode, that means January 2008 through June 2009. The December 2007 peak marks the boundary.
The lagging unemployment rate from the cycle lesson helps explain the opening dates. Broad activity can turn up while employment remains weak. NBER's trough separates contraction from expansion; it is not a claim that every household has recovered.
Why stocks can turn first
Stock prices reflect expected future cash and the return investors require for waiting and taking risk. Interest rates help shape both. Falling demand can hurt company profits. But prices can rise when the outlook becomes less grim than investors feared, or when the return they require falls.
Investors can change their expectations before businesses see orders improve. Less bad than expected can be good news for stocks. That helps explain why prices can turn before production or employment does; it does not make the market a reliable clock.
A bear market describes a steep fall in stock prices; a recession describes shrinking economic activity. Either can occur without the other. Even when both happen, their turning points can be far apart.
Two recoveries, different timing
Compare two episodes from Schwab's 2019 market history. Both use daily closes of the S&P 500 price index, which excludes dividends. The gaps compare calendar months, not exact numbers of days.
In the dot-com episode, the economy reached its trough in November 2001. The S&P 500 reached its closing low on October 9, 2002. Stocks were still falling after the economy had entered a new expansion. The gap between the two lows was 11 calendar months.
The 2007–09 financial crisis reversed that order. The S&P 500 bottomed on March 9, 2009, before June's economic trough. The stock-market turn led the economic turn by three calendar months, while the unemployment rate in our opening example kept rising.
Stocks led the economy out of one slump and followed it out of the other. These two contrasts show why there is no fixed order; they do not give you an average waiting time.
Read the dates behind the headline
For a recession headline, check three dates: the economic month it describes, the day it was published, and the day of any stock price being discussed. Then ask what information was available on that day.
The September 2010 announcement confirmed the June 2009 economic turn. It could not have identified the March 2009 market bottom for you as it happened. On March 9, you could observe the closing price. You could not know it would remain the crisis low.
That distinction matters when you read an old market chart. Recession shading can use dates confirmed much later, making the past look clearer than it was. A claim about buying “when the recession ended” needs an explanation of how you would have recognized the end then.
A stock index's fall from its own high to its own low uses market dates. Its return between an economic peak and trough uses recession dates. In 2009, measuring through June includes months after the March stock market low. Moving the endpoints changes the question.
Recession dating looks backward. The yield curve looks ahead, using bond yields to assess recession risk. Neither hands you a stock market entry date.
In short
- NBER dates US recessions from broad economic evidence, with confirmation arriving later.
- A recession can end while economic activity remains far below its previous peak.
- Stocks can bottom before or after the economy reaches its trough.
- A market's peak-to-low loss and its return between recession dates use different endpoints.
- Knowing when a turn happened is different from knowing it at the time.