If a Recession Is Coming, 100 Years of History Says This Is the Best Move Investors Can Make

100 years ago, Standard & Poor's -- now known as S&P Global (NYSE: SPGI) -- started tracking the U.S. stock market with its "Composite Index" of 90 companies. In 1957, it expanded that list to the top 500 companies, creating the S&P 500 index (SNPINDEX: ^GSPC).

If you had invested $1,000 in that index upon its creation in 1926, your investment would have been automatically recalibrated to include the top 500 companies in 1957. After including reinvested dividends, that investment would be worth around $13 million today. That's equivalent to the purchasing power of roughly $688,900 in 1926.

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Together, the S&P 500 and its predecessor have delivered an average annual total return of about 10% over the past 100 years. That's an impressive run, considering the U.S. experienced 15 recessions -- including the Great Depression and Great Recession -- during that tumultuous century. So when the next recession occurs, the best move will be to simply do nothing.

Why is "doing nothing" the best strategy?

Peter Lynch, who famously beat the S&P 500 for more than a decade, once said: "Everybody in the world is a long-term investor until the market goes down." In other words, most investors can't stomach the deep downturns that routinely flush the "weak hands" out of the market.

Let's take a look back at the last three market downturns: the Great Recession (2007-2009), the COVID-19 Recession (2020), and the Fed's aggressive rate hikes (2022-2023). The S&P 500 declined by 57% from Oct. 2007 to March 2009, 34% from Feb. to March 2020, and 25% from Jan. 2022 to Oct. 2022. But if you had invested $1,000 in the S&P 500 at its lowest point on March 9, 2009 (and reinvested your dividends), your investment would be worth $16,000 today.

But even if you didn't invest in the S&P 500 at that generational low, you'd have been fine if you simply held your stocks instead of panicking. A $1,000 investment in the S&P 500 on Oct. 9, 2007 -- its peak right before the crash -- would still be worth nearly $5,800 today.

Even if you weren't bold enough to start buying stocks as everyone was scrambling for the exits, your portfolio would have recovered if you simply sat still and did nothing. Some blue chip stocks never bounced back after the Great Recession, but an investment in an S&P 500 index fund -- which passively tracks the index's shifting holdings -- would have protected your wealth.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends S&P Global. The Motley Fool has a disclosure policy.