Statistical Shocker: S&P 500 Performs Best When Economy is Shrinking
For some reason all this negative news about the economy has taken its toll, which isn’t normal for me. To help maintain a level head, I spent some time digging into the data and it appears there is almost no correlation between poor economic data and market returns. I’d like to share what I’ve found.
First, this is particularly interesting:
As you can see, there is very little correlation between the economy and the stock market. Not only that, investors choosing to own stocks only in years with negative GDP growth would have earned nearly 4 times as much than investors choosing to invest only when GDP was growing at 5% or better. So the next time someone tells you the market is going to drop because the economy is bad or unemployment is high, send them a link to this blog post.
I also spent some time looking at tables of GDP growth vs. S&P returns and I see no correlation. Here’s a chart comparing the last 10 years during this range-bound market of ours:
Just for fun, here is S&P vs Unemployment:
So thats the data. It’s comforting in a strange way, isn’t it?
