The "average" investor is in jobs less hit by typical recession/down market impacts, since the odds of a hospitality worker or barista having a retirement account in the first place is much lower than the odds of a white collar employee.
The point of comparison would be average reduction in investment vs average reduction in stock price. It’s true people invest less, but stocks take much larger drops than the reduction in the workforce.
Are you arguing that the stock market is not correlated with unemployment? That’s a weird and plain stupid hill to die on because anybody can disprove it with 3 seconds of googling.
It might be a stupid hill to die on that general statement, but currently we have a falling stock market with very little unemployment which is part of the reason for the inflation.
> 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
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.
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.
> 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
Of course they don’t, that’s not what your articles say. Did you read them? They, respectively, say that the market is forward-looking and that major gains are made after downturns.
It can simultaneously be true that major gains are made after downturns and that there has historically been a strong correlation between downturns and unemployment.
Not if they're unemployed, which is more likely in down markets.