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Which Asset Class Wins in Recession Years? Comparing the Last Four Downturns

Jun 13, 2025

Recessions present unique challenges—and opportunities—for investors. Understanding how different asset classes perform during downturns can guide smarter portfolio decisions. Here’s a look at performance across the last four recessions: 2001–02, 2008–09, 2020, and 2022.

1. U.S. Stocks: Backed by Long-Term Recovery Potential

  • 2001–02 (Dot‑com crash): U.S. large-cap stocks dropped ~49%, but rebounded over the following years.
  • 2008–09 (Global Financial Crisis): Equities plunged around 50%, marking one of the steepest declines in modern history.
  • 2020 (COVID-19 crash): Markets fell ~34% but recovered to new highs within months.
  • 2022 (Inflation- and rate-driven bear): Stocks declined ~27%, reflecting tightening monetary conditions and geopolitical strain.

Bottom line: Stocks tend to take the hardest hit during recessions—but recovery is the norm, and long-term returns remain solid.

2. U.S. Bonds: Your Go-To Defense

  • Historically, long-term Treasuries lead all asset classes during downturns, often delivering positive returns when equities decline.
  • Even intermediate-term bonds and high-quality corporate bonds tend to appreciate as interest rates fall.
  • Cash and short-duration bonds also perform well by offering stability and liquidity.

3. Gold & Precious Metals: The Hedge That Works

  • Gold has consistently delivered positive returns during all recent recessions.
  • During 2008–09, gold rose around 25% while stocks sank.
  • In the 2020 downturn, it gained approximately 24%.
  • In 2022, gold outperformed many other assets, reinforcing its role as crisis insurance.

4. International Equities & Small-Caps: Increased Risk

  • International stocks often lag during U.S. recessions, falling harder due to global exposure.
  • Small-cap U.S. stocks typically decline more than large caps due to higher sensitivity to economic stress.
  • These asset classes tend to lead the recovery once the downturn ends.

5. Crypto & Alternatives: Volatile and Unpredictable

  • Bitcoin fell around 60% in 2022, mirroring equity weakness.
  • During the 2020 crash, crypto assets behaved more like speculative equities.
  • Alternative assets like art or collectibles may hold value, but often lack liquidity and predictable returns.