DID THE RECESSION JUST END?

The Bloomberg Chart of the Day is showing the clear correlation between jobless claims and the end of recessions.

claimsend

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But don’t make the classic economist mistake of not being able to connect the dots between the economy and the market.  The end of the recession does not necessarily mark the bottom in the market.  As Japan experienced time and time again (and as we experienced in 2002) the market can drift lower even as the economy actually improves.  Are we seeing a repeat of the 2002 recession when investors were drawn back into stocks in 2001 only to get clobbered over the summer of 2002?

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. great post as always. I think this looks like a classic head fake. The improvement we're seeing is almost entirely in the fake bank earnings and that's it. Sentiment in this market could change on a dime. Without the government holding investors' hands we could be sitting right at the peak.

  2. are 81, 92, 01 and 07 same kind of recession ??

    Every recession we came out using reduced interest rate, increased inflation and increase demand fueled by consumer debt.

    we have 0% interest rate
    we have debt thru roof and consumer is deleveraging.
    demand is not going up

    How can we use unemployment is lagging indicator,
    when consumer is deleveraging and not taking on any more debt unlike earlier recession

    the downward pressure on wages is going to continue with increase labor pool ( see now it doesn't sound as bad as unemployment )

    but what i know I am not a economist just use common sense.

  3. The time is to short soon, not buy. There will be a quick and deadly correction soon. Goldman Sachs just upgraded BAC, meaning they will short it soon. And Cramer says all aboard the rally. Both bearish signals.

  4. Wait! How do we even know that jobless claims even peaked? Look at the previous peaks and 'end of recessions', there were downticks in the jobless claims before the actual peak.

  5. We shouldn't get ahead of ourselves. The jobless claims only looked to have peaked since there is no further data yet. What if this mild pullback in claims is just a pullback?…does everything suddenly change again? We would need to come down to below 550k to see that a real peak in claims is in place!!…Correlations only work until they don't, the economy is still a mess and only the very optimistic would say that June marks the end!…Maybe it marks the first official signs of slowing declines (as anecdotal evidence seems to suggest), but not stabilisation or growth!!

  6. If the market has continued rallying since March 9 in the face of a constant stream of bad news, there's no reason to believe that it won't react negatively when the good news starts coming out. Sell on the good news …