Unemployment and Stock Returns

One of the best times in stocks is when it’s a rotten time for everyone else. It’s sad, but true. When the stock market was a “screaming buy” in August 1982, the unemployment rate was close to 10%.

In March 2009, the jobless rate was 8.6% and it continued to rise to a peak of 10.1% in October 2009.

I broke out stock market returns since 1948 and sorted them by unemployment rate. Of the 63 years, a total of 396 months or 33 years saw the unemployment rate over 5.5%. Combined, the stock market produced an average annualized return of 15.0%.

For the remaining 360 months or 30 years, the unemployment rate was below 5.5%. The stock market produced an annualized return of 7.1%.

Posted by on January 27th, 2011 at 10:21 pm


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