The S&P 500 vs the unemployment rate simce 1950 (Charts)
This is a follow up to my previous post. Anchak suggested a chart overlay of the S&P 500 vs. the unemployment rate. Great idea! So here it is. First the entire period from 1950 to 2008, and then 10 year periods for more details. And all of this vs. recessions! This is really geeky...
The blue chart is the S&P 500, the red line is the unemployment rate (right scale) and the green line is the percentage change of the unemployment rate vs. a year ago (left scale). The rose colored fields are recessions.
So it seems that every time the S&P 500 (=stock market) rose 3-6 months before the end of a recession, the exception was 2002-2003. IMO the very high valuation of the stock markets in 2000 and the 911 attacks led to a prolonged fall of the stock market back then.
Conclusion? The stock market usually bottoms out 3 to 6 months before a recession ends. Also, the unemployment rate percentage change shows the beginning and end of a recession.
So let's see, when the trends change.