To The Moon

If Unemployment Levels Remain Low, How Far Can the Stock Market Decline?

Let's take a look at the 2000 stock market peak and the 2001 recession to see one possibility how the stock market may react in 2022-2023. $SPDR S&P 500 ETF Trust(SPY)$ ，$Cboe Volatility Index(VIX)$ ，$S&P 500(.SPX)$ ，$Invesco QQQ Trust(QQQ)$ ，$ProShares Ultra QQQ(QLD)$ ，$ProShares Short QQQ(PSQ)$ ，$NASDAQ(.IXIC)$ ，$NASDAQ 100(NDX)$ ，$Nasdaq100 Bear 3X ETF(SQQQ)$ ……

S&P 500 chart courtesy of StockCharts.Com, annotations by Mish.

Where Is the Market Headed and When?

Nasdaq 100 monthly chart courtesy of StockCharts.com, annotations by Mish.

StockCharts.com Mish‘s Answer：

• I think the $S&P 500(.SPX)$ is headed to the 2400 level and the Nasdaq to the 6,000 level.
• That's roughly a 50% decline from the top on the $S&P 500(.SPX)$ and a 64% decline from the to on the $NASDAQ(.IXIC)$ .

A reader commented "You're on record stating a low 1% is max rise in unemployment. That's absolutely CRAZY! There's absolutely no way either of these indices dive down to those levels without unemployment moving above 5% and staying there for the better part of 12 months."

Recession Rise in Unemployment Rate Since 1948

Unemployment data from BLS, chart by Mish

During the 2001 recession, the unemployment rate only rose 1.1% points.

Unemployment data from BLS, chart by Mish

The percentages are recession start and end. The unemployment tends to rise after the recession ends but that was not the case in the short pandemic recession.

S&P 500 Discussion for 2001 Recession (Lead Chart)

• From the stock market peak in 2000 to the 2002 bottom the $S&P 500(.SPX)$ fell from 1530 (1553 if you go back a few months) to 769.
• That's a decline of 49.8% top to bottom.
• The peak was well before the recession, but many fervently believe we are not in recession yet.

Nasdaq 100, 2001 Recession

Nasdaq 100 monthly chart courtesy of StockCharts.com, annotations by Mish.

Nasdaq 100 Recession Notes

• Between March of 2000 and the October 2002 bottom the Nasdaq had rallies of 43.1%, 32.8%, 53.7%, 59.3%, and 22.9%.
• Despite those rallies, two of them well over 50%, the market declined 83.5%.
• The Nasdaq declined 56.9% before the recession even started.
• The rise in unemployment rate during the recession was only 1.1%.

JOLTs

Job Openings from BLS, chart by Mish

The BLS report (Job Openings and Labor Turnover) JOLTs reports shows there are an unprecedented 10.7 million openings.

Employment Levels in Retirement Age Groups

Employment Levels by the BLS, chart by Mish

In addition to 10.7 million openings, as of January 1, 2022 there were a whopping 22 million workers of retirement age who are still working.

10.3 million of them are over the age of 65. Potentially millions of them will retire reasonably soon.

Employment Levels

Payroll and Employment Data from the BLS, chart by Mish

Hope it helps you more understands the trend of recently.