Crew Capital Management Thoughts on Investment

Welcome to the Crew Capital Management Thoughts on Investment blog. At Crew Capital, investment education is key to how we work with our clients. We hope our conversation and analysis entice you to think further on your investment strategies and planning. For further discussion, please contact us at rjung@crewcapital.com

Thank you!
Robert F. Jung, CFA CPA*

*CPA inactve

Monday, October 27, 2008

Unemployment & Stock Returns

The stock market anticipated the 1990-1991 recession as early as September 1989, and started to decline. But the unemployment rate didn’t start to rise until June 1990. By the time the unemployment rate peaked at 7.8% in June 1992, stocks were back to delivering positive 12-month returns. The same pattern held up in the 2001 recession. Stocks started predicting a recession the spring of 2000. The unemployment rate didn’t start to rise until June 2001. This time around, the markets started weakening in the summer of 2007 and unemployment readings began heading up earlier this year. To be sure, unemployment seems likely to increase further. So we can’t see a peak in that number yet. But businesses are aggressively cutting costs and the plunge in commodity costs should begin to help margins. With stocks already down nearly 50% from their peak, weak earnings may already be largely priced in.

source: Argus Research Market Watch, October 27, 2008
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