Stock prices, recessions, and unemployment rate

This is an interesting chart (click on chart to enlarge it) (courtesy of Schwab).

It shows what happens on average to stock prices ahead, during, and after recessions. It shows also the typical behavior of the unemployment rate relative to recessions.

What I find interesting is that the market keeps rising at least until the unemployment rate peaks.

History shows also that short-term interest rates rise after the unemployment rate peaks.

Do you see my point? We need to follow the unemployment rate. The first sign the market is in trouble from a long-term erspective is that the unemployment rate declines.

The next signal is the rise in short-term interest rates. This is the time to be very careful.

Let's see if history repeats itself.

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can review The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific money management needs.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, since 1977
Ranked in the Top 10 for 12, 6, and 3 months for market timing by Timer Digest

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