Gummy bears
Investors are spooked. They fear bears are hiding around the corner, waiting to devour them. After all, look at the market’s reaction to July’s unemployment figures. The S&P 500 index of big American companies dropped 6% after the Bureau of Labor Statistics (BLS) announced the unemployment rate had climbed to 4.3% in July from 4.1% the previous month. This uptick triggered the Sahm rule, a little-followed but historically accurate recession indicator.
The metric proposes that the unemployment rate rose fast enough to suggest the American economy is in trouble. But, as Valuabl has argued, it’s wrong this time. Punters who sold their stocks on the expectation that a recession was inbound got burned. The market has recovered its losses and then some. So, was it a mistake to sell or short stocks on recession fears? Absolutely. There is no recession around the corner. This bear market has no teeth.
The unemployment uptick doesn’t indicate a recession this time because the labour market has e…