Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Here’s Why "Strong Jobs" Don't Mean "Higher Stocks"

Stock-Markets / Stock Markets 2018 Sep 20, 2018 - 10:58 AM GMT

By: EWI

Stock-Markets

The stock market leads the economy, not the other way around

It's a wonderful thing when jobs are added to the U.S. economy.

But, as far as investing goes, history shows that you should not bet your stock market portfolio on it. Conversely, even a series of weak jobs reports doesn't mean you should bet against stocks.


This is worth mentioning because many pundits believe big economic factors like jobs determine the stock market's trend.

Consider this from CNN Money:

Solid corporate earnings coupled with continued demand for new technology bode well for the major U.S. stock indexes. So do expectations of a buoyant economy at home and a recovering one overseas. [emphasis added]

When do you think this article was published?

Well, it's hard to tell because the narrative could fit different timeframes in recent history. Plus, correlating strong earnings and the economy with gains in stocks is all too common.

That article was published on Dec. 31, 1999 -- just two weeks before the DJIA hit a milestone high and then went on to shed nearly 40% of its value through October 2002.

We saw a similar narrative near the 2007 peak. By the time June 2007 rolled around, the Elliott Wave Financial Forecast noted:

Just as advocacy of the New Economy blossomed in early 2000, a wide array of rosy long-term scenarios are now proclaiming "a special time in market history." "This group of extreme optimists believes that global economic strength will keep shares rising for much longer than has been common in previous eras." [emphasis added]

Again, the DJIA topped soon after and went into the worse bear market since the Great Depression.

Now, let's look at what happened when job numbers were weak. On Feb. 6, 2009, a headline said (Center for American Progress):

Job Losses Continue at Accelerated Pace

Wouldn't you know it -- just a month later, the stock market bottomed and went on to quadruple through January 2018. So much for the shrinking U.S. economy in 2009 and the unemployment that hit 10% in October of that year.

Even this brief overview of recent market tops and bottoms makes clear that jobs and the economy FOLLOW the stock market, not lead it.

The belief that jobs reports lead the market is just one myth.

Learn about others in our special, free report, "Market Myths Exposed."

Did you know that the vast majority of portfolios are built on false assumptions? These false assumptions -- or Market Myths -- have been passed down across generations. They are so baked into investor psyche that no one ever thinks to challenge them... but we do. Do earnings really drive stock prices? Can the FDIC actually protect you? Is portfolio diversification a smart move? Download Market Myths Exposed now and find out whether your portfolio is built on flawed foundations. We guarantee you'll be shocked to find the truth.

Sign up now and get FREE access to The Market Myths Exposed eBook.

This article was syndicated by Elliott Wave International and was originally published under the headline Here’s Why "Strong Jobs" Don't Mean "Higher Stocks". EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in