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Markets Will Improve Even as Unemployment Rises

By    |   Friday, 07 Aug 2009 08:41 AM

The average investor is baffled when they learn that the financial markets are improving even as the unemployment rate continues to rise.

After all, both current Fed Chairman Ben Bernanke and his predecessor Alan Greenspan have stated in the past week that the unemployment rate is likely going to 10 percent or more. So why wouldn’t markets tank upon hearing that?

It’s because the job market lags the economic cycle, and the economic cycle lags the financial market cycle.

Employers won’t immediately start a hiring spree even though they see initial signs of improvement in their businesses because they don’t know yet if it will hold steady or not.

Therefore, business improves for a while first, and then hiring happens.

However, even before this economic recovery happens, savvy investors buy up bargains when they think no one else is aware yet of the imminent recovery and they’re still too scared to go in and buy stocks again.

If cautious investors go in and buy stocks after the economy shows sure signs of recovering, then the best pricing is gone and so are the better percentage returns.

So, savvy investors are buying up stocks and foreign currencies while everyone else is still skittish. This is how they beat the average investor.

As stocks improve, you’ll also see pairs like GBP/USD mimic the recovery in stocks.

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The average investor is baffled when they learn that the financial markets are improving even as the unemployment rate continues to rise. After all, both current Fed Chairman Ben Bernanke and his predecessor Alan Greenspan have stated in the past week that the unemployment...
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2009-41-07
Friday, 07 Aug 2009 08:41 AM
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