What's Next For Markets "The Enemy Of My Enemy Is My Friend"
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Sep 28, 2025 Explore the surprising link between rising equity markets and increasing unemployment. Historical trends reveal how higher jobless rates can sometimes boost stock prices, particularly during inflation. The discussion delves into the unique market dynamics post-2022, highlighting why current conditions differ from past downturns. It also examines the potential benefits of a recession for equities and the common factors that historically accompany rising stocks with unemployment. Get ready to rethink everything you thought you knew about market performance!
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Inflation Shock Flipped Rates-Equities Link
- After the 2022 inflation shock, equities became negatively correlated with rates and sometimes rose when unemployment increased.
- Historically in high-inflation eras, lower rates — even driven by rising unemployment — were bullish for stocks.
Position For Rate-Driven Market Reactions
- Recognize that market moves often reflect rate expectations more than the raw economic data.
- Adjust positioning for scenarios where weaker jobs data lowers rates and supports equities instead of causing panic selling.
Rising Unemployment Can Coincide With Rising Stocks
- The recent pattern of rising unemployment alongside rising stocks is uncommon in recent decades but not unprecedented.
- Stephen Gregory found four historical episodes where unemployment and the S&P rose together for up to two years.