Maybe it’s just me but it seems as though the rebound we have seen in the S&P 500 Index might be a bit premature. Granted, my chart only goes back to 1990 (I’m working on a longer chart) but based on what I see, there seems to be a nice inverse correlation between the S&P 500 Index and the unemployment rate:
Notice that when the unemployement rate is higher in the early to mid 90s, the S&P 500 Index stays relatively flat. Then, as unemployment is lower in the latter part of the 90s, the S&P appreciates dramatically. You then see almost a mirror image again in from around 2003 to around 2007.
Now notice that the S&P 500 bottomed out in the early 2009 and rebounded dramatically even though the unemployment rate has continued to soar. The unemployment rate has at least decreased slighty from 10% in December of 2009 to 9.7% in January. But, if the last two peaks and troughs are any indication, I think the S&P 500’s rally could be premature.
I’m not one to try to time the market but I will say I have been suspicious of the market’s remarkable rebound even though the economy doesn’t seem that much better.
Thoughts?
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