Actually, you are the one saying this time is different. You think that the stock market can rally when we are heading into a recession.
The data set you are using is incomplete, because you are not looking at any mid-year cycles where the median yoy housing prices decline nationwide, a precursor to recession (Edward Leamer). We have never had this happen, so the data doesn’t exist.
Your data set that you are using, the years 1930 – 2002, has a few differences from the current year (Bill Fleckenstein said the last 2 recession you mentioned have no relevance, bec. it was a different env’t with interest rates and debt).
Mainly, this time is the biggest budget and account deficits in history, consumers so far in debt they are using equity in their homes to pay for gas, and the biggest asset bubble ever, with even the FDIC and Greenspan concerned about systemic financial risk to the GSEs and our entire economy.
For the first time since the Great Depression, median year over year home prices have dropped in all areas of the country except the South. Median yoy home prices are up .3% and .9% for resale/new. (Remember how Lereah kept saying home prices nationwide have never dropped and never would? Well, it’s happening now!)
I will watch the stock market closely, but it is beyond me why anyone thinks the stock market could rally in such a precarious economic time.
The stock market rallies when earnings are up, and loses when earnings are down. With the slowdown in consumer spending finally affecting the bottom line of many companies, lenders and builders starting to issue warnings, investors are going to put the Fed-is-done rally behind them, and wake up from their slumber to realize the seriousness of the slowdown. The stock market is the same: when earnings go down, the share prices follow.
Has the stock market ever rallied going into a recession?
My estimate is that your technical indicators will not line up for you to make that trade this fall.
