In the early 80’s, things looked even bleaker than they do today. Unemployment was around 10%. Between mid-81 and mid-82, S&P lost 30%.

S&P bottomed on August 12, 1982, at 102. Unemployment rate continued growing steadily, gaining a whole percent until peaking in December. Official recession was over in November 1982. By the time the first drop in unemployment rate was recorded, S&P was already in 140’s.

S&P bear market not unlike todays began on July 16, 1990. It coincided with a spike in unemployment. Between July 16 and October 11, S&P went from 368 to 295. Unemployment continued growing well past that date. Recession officially ended in March 1991. Unemployment didn’t really begin to decline till July 1992, when S&P was above 400.

During the post-dot-com/9/11 recession, S&P bottomed in September 2002. Unemployment peaked in June 2003. Between September 2002 and June 2003, S&P gained 25%.

What’s the lesson? Simply that unemployment is a lagging indicator and it will keep growing past the bottom. If you’re fixated on high and growing unemployment, you will incorrectly identify true economic recovery as a “sucker rally”. If you attempt to act on this misidentification, you can lose a lot of money. Shorting the market in May 2003 would have been a costly mistake.

And one more thing to consider: this is the first recession since 1961 that’s going to be dealt with by a Democratic president and Democratic majorities in both chambers of Congress. It’s unimaginable that anything like Obama’s stimulus package could have come from the desk of Richard Nixon or Ronald Reagan. For the first time since 1961, we will see what recovery looks like when it’s guided by real economics rather than supply-side pseudoscience or dogma of fiscal conservatism.