Unemployment goes up and so do stocks – what gives?
While unemployment surged into the double digits in April, the S&P 500 Stock Index rose 12.82%(1), its best month since 1987.
What gives?
Many feel that stock markets and the economy go hand in hand. While this is true in the long run, there can also be wild discrepancies between the two in the short-term. As an example, during 1982, unemployment in the US rose from 8.6% to 10.8% while the S&P 500 rose 21.6%(2).
Markets tend to reflect where the economy will be 6, 9 or 12 months from now and not the economic headlines of the day. That’s why waiting for the economy to “stabilise” or “get back on track” before investing will usually result in disappointment and a wasted opportunity.
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Stay safe and connected.
Paul
1. Ycharts
2. Morningstar, May 6, 2020