My research assistants, Zi Yang and Yuge Pang, and I decided to examine how various asset classes have fared leading up to recessions and during recessions—as defined by the National Bureau of Economic Research—over the past 50 years. We studied the seven recessions in that period (1973-75, 1980, 1981-82, 1990-91, 2001, 2007-09 and 2020) and found that growth stocks led the way in the lead-up to recession. But, once we entered a recession, fixed income far outperformed equity, with international stocks providing the worst returns by far.

Recession Results

How investment categories perform going into a recession, and during it

Average monthly return in the nine months leading up to recession

Average monthly return in recession

Average monthly return in the nine months leading up to recession

Average monthly return in recession

Average monthly return in the nine months leading up to recession

Average monthly return in recession

Average monthly return in recession

Average monthly return in the nine months leading up to recession

The asset classes we examined were U.S. high-yield bonds, U.S. long-term bonds, U.S. short-term bonds, U.S. total fixed income, U.S. growth stocks, U.S. value stocks, U.S. small-cap equity, international equity and U.S. large-cap equity.

In the nine months before the start of a recession, U.S. growth stocks delivered an average monthly return of 0.92% (a compound annualized return of 11.6%), followed by U.S. small-cap equity at 0.83% monthly (10.4% annualized). U.S. total fixed income averaged a monthly return of just 0.48% (5.9% annualized).

But in a recession, U.S. total fixed income averaged a monthly return of 0.62% (7.7% annualized), while U.S. growth stocks returned an average of 0.12% monthly (1.5% annualized). Returns were negative for every other equity class we studied.

Among the fixed-income classes, U.S. high-yield bonds are notable for having the lowest average monthly return of any of the asset classes we studied in the lead-up to a recession, at 0.14% (1.7%% annualized), and for being the only fixed-income class with a negative return during a recession, at a monthly average of negative 0.08% (minus 0.9% annualized).

On the equity side, international equity was easily the worst performer in a recession, at negative 0.93% a month on average (minus 10.6% annualized). That compares with an average monthly return of 0.80% (9.9% annualized) in the lead-up to a recession—the biggest difference for any asset class between returns before and during a recession.

The takeaway from it all, if history can tell us anything, is that once we enter a recession, the average investor best be prepared to head toward fixed-income assets and get out of international equities.

Dr. Horstmeyer is a professor of finance at George Mason University’s Business School in Fairfax, Va. He can be reached at reports@wsj.com.