According to research by JP Morgan Asset Management, from the Eisenhower recession in 1957 to stagflation in the 1970s, to the early 1980s double dip recession, to the 1990 recession, stocks turned higher well before the other parts of the economy began to turn higher. As you can from the charts, stocks tended to bottom months (and sometimes years) before earnings, GDP, and payrolls officially turn higher.
More recently we saw similar action during the Financial Crisis and then again during the worst of COVID. Don't forget how stocks soared in April, May, and June of 2020, yet we saw some of the very worst headlines in our country’s history. The truth is the stock market isn’t looking in the rear-view mirror, it is always looking forward and discounting what could be out there in the future.
The fact that the market leads the economy is one of the more confusing concepts for many, but it is one that is so important to understand. Stocks can rise even as the news is bad, this is how it works.If you are waiting for things to officially improve, you could likely miss out on substantial gains along the way.
Investing is sometimes extra scary, but this is part of the process. If you are scared or uncomfortable, that is all part of investing in a lot of ways and if you run the other way every time things get scary, you’ll likely never be able to meet your investment goals.
Markets, Economy, and News
November 22, 2022