Not everyone is pessimistic. James Bianco of market-research firm Bianco Research in Barrington, Ill., who warned of market excesses during the bubble, produced a quick and optimistic study. Since 1948, it showed, whenever the unemployment rate has suddenly jumped as much as 0.4 percentage point in a month, as it did in August, the stock market almost always has done well in the next 12 months. The S&P 500 has averaged a gain of 24.61%.
Why? "The unemployment rate is a lagging indicator -- a fact that seems lost on many commentators today," he wrote. "When a lagging indicator starts to accelerate, like today's 0.4% rise in the unemployment rate, it often occurs near the trough in the economic downturn. This is why stocks, which are a leading indicator of the economy, will do well in the following year." |
