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by scarface74 1261 days ago
https://seekingalpha.com/article/4170913-unemployment-rate-a...

> An inverse relationship between level of unemployment and forward stock market returns. In the current quintile (2.5% to 4.4% unemployment), the average S&P 500 return over the following year is 5.6% versus and average of 12.7% in all periods. The best returns historically have come after periods of high unemployment
3 comments
thedudeabides5 1261 days ago
That's because the stock market falls first, and goes up once we hit the bottom.

https://twitter.com/abcampbell/status/1611507672142036992

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JumpCrisscross 1261 days ago
> because the stock market falls first, and goes up once we hit the bottom

Also, interest rates. When unemployment goes up, the Fed cuts rates.

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roperj 1261 days ago
Maybe you should use a source that is at least self consistent?

Inverse relationship between unemployment and returns - proceeds to show a table where the lowest quintiles of unemployment have the lowest returns. That doesn’t seem very inverse to me.

In any case even if you don’t use some trash site that can’t get a basic editor/proofreader and correct that error, it’s not counter to anything already told to you by me and others.

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JumpCrisscross 1261 days ago
You both make valid points. The JPMorgan memo's point is that a view on the economy is insufficient for reaching a view on the market. If we're heading into a recession, that doesn't necessarily mean stocks will fall. If we've rounded the bottom, it doesn't mean stocks will rise. More pointedly, it's asking its clients not to sell even while it predicts a recession.

The Seeking Alpha piece doesn't support your argument. Returns one year post peak unemployment are good because valuations at peak unemployment are in their trough. The correlation drives the effect. The article could be summed up as buy when the market is low / unemployment is high.

There is a real effect that comes from the stock market being forward looking and the labor market backwards [1]. When unemployment goes up, markets go down, and that's a problem for forced sellers.

[1] https://research.upjohn.org/cgi/viewcontent.cgi?article=1131...

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