During and after every recession you hear folks say, “Stocks can’t rise until unemployment improves!” But stocks do rise. Unemployment lags the stock market—by a lot usually. In my 38-year career, that’s been the case, and I can’t find a time it wasn’t so historically.
This bunk pervades because it’s intuitive. Folks believe high unemployment means people spend less. That’s bad for profitability since firms aren’t selling much and bad for the economy and stocks too—so the story goes. But markets aren’t intuitive, they’re usually counterintuitive.
You rarely find anyone who says the reverse—that stocks can and should rise while unemployment is high and failing to fall. But it’s always been true! And you know, when almost everyone believes something—believes it with a religious fervor and considers you insane for questioning it—that’s when you most need to check if it’s true. Check history! The data is freely and easily available.

Unemployment Up, Stocks Up Too?

Even if you pause to consider recent history, you start to realize something is wrong. What happened in 2009? Unemployment rose all year—going above 10 percent. Ugh! Yet stocks had a fantastic year—US and world stocks rose 68 percent and 73 percent from the March low, for a 26.5 percent year overall for US stocks, 30 percent for the world.1 Stocks rose, hugely, while unemployment was rising. That wasn’t a one-time fluke. (I even wrote about this 23 years ago in my 1987 book, The Wall ...

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