Market Return By Unemployment Rate

I ran a quick test this afternoon. I took all the monthly unemployment rate figures since 1948 along with the S&P 500’s monthly return. I then sorted them by unemployment.

Here’s the S&P 500’s annualized price return by unemployment rate since 1948:

Under 4%: +4.71%
4% to 6%: +7.83%
6% to 8%: +18.09%
Over 8%: +22.17%

By count, there were 115 months when the unemployment rate was below 4%, 432 months between 4% and 6%, 221 months between 6% and 8%, and 83 months when it was above 8%.

I don’t think you can build a timing strategy here, but it probably confirms Warren Buffett’s dictum, “Be fearful when others are greedy and greedy when others are fearful.”

Posted by on December 18th, 2018 at 3:14 pm


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