How To Be Fully Invested At The Bottom Of The Next Bull Market
By Dave McLachlan
As an investor, you will know that a Bull Market is: When prices in the stock market are rising, and rising consistently.В If the market is in a down trend, knowing in advance when the next bull market will happen can be a dream held by many investors.
At first glance it may seem like a silly thing to try – especially when there are perfectly qualified people like financial planners or stock brokers telling you it is impossible.В But what if there was a way to know, with a high probability, that a new bull market was starting?
An Economist Worth Reading About
Ken Fisher, in his book “The Wall Street Waltz”, discovered that unemployment was the key. Why? It’s simple: when the economy and the stock market are riding along nicely and moving upwards as they should, unemployment will never rise too much. This means that people are working, companies are making profits, and both of them are spending this money and stimulating the economy.
But when an economic recession hits, as many people will know from the 2008 bear market and recession, the reverse happens as unemployment starts to rise and people spend less, the stock market declines.
Unemployment: The One Percent Rule
This is where Ken formed his “1 Percent Rule” – where if unemployment figures rise by more than 1 percent, this is a good time to start putting money back into the stock market. While it is hard to pick the exact bottom of a new Bull Market, Ken says this rule will get you in the ball park and ready to take advantage when it comes along.
To put it more simply – major stock market lows over history have never happened without first a rise of at least 1 percent in unemployment.В Let me give you an example: Stock market prices had been falling for two years since 1968, when unemployment rose sharply as 1970 started.В In May of that year a new bull market began.В And not just in 1970, but in every other major low since – the 2009 low is also a perfect example.
Ironically, unemployment does not forecast a peak in the stock market, or an oncoming bear market.В The stock market itself is a leading indicator for the overall economy, falling months before economic and company data start going bad.В But it does say that a major peak in the market rarely occurs without two years of falling unemployment.
So what can you do with this information?В Well next time the stock market is falling in a bear market, keep an eye on the news for a time when the unemployment rate rises more than 1 percent.В When it does, it might be a good time to get back in the stock market.
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February 1, 2010
Tags: bear market, bull market, investing, unemployment Posted in: Articles On Building Wealth
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