Blue Haven

Charts for the optimist

By October 17, 2022 No Comments

Every quarter, JP Morgan’s Asset Management division sends out a Guide to the Markets. This guide contains a lot of useful information on markets and the economy. We’re sharing a few of our favorite charts that we believe lend reason for optimism right now.

Stocks can rise with unemployment

In 6 of the last 9 recessions since 1960, the stock market has risen alongside the unemployment rate. With the Fed stating that they’d like to see a softer labor market, it wouldn’t be a surprise to see something similar play out now.

There’s angst around the housing market as people wonder if a repeat of the 2007 housing crash is in play. The following two charts suggest it’s different this time. First, mortgages have gone to higher quality borrowers in recent years compared to the years leading up to 2007:

Second, there’s a major shortage of homes available. For prices to crash there needs to be an abundance of supply. There’s not:

The consumer, as measured by the University of Michigan’s consumer confidence index, is in a glum mood. Since 1970, that’s been great news for stock market investors. From the nadir of the sentiment index, the S&P 500 has risen an average of 25% one year later:

Fixed income investors can lock in yields that are the highest they’ve been in years across the entire fixed income market:

We came into the year saying that a 15% drop or more would be a buying opportunity. We’ve exceeded that, and with stocks down 25% through three quarters, we’re not changing our tune. Investors should consider increasing their exposure to equities here.

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