Consider it the Fed's chicken-or-the-egg dilemma: Do rising stocks drive down unemployment or does lower unemployment drive up stocks?
One view of the relationship between the two suggests that it is the former and not the latter, hence the continuation of the central bank's easy-money policies.
Nick Colas, chief investment strategist at BNY ConvergEx, has run a comparison and found an interesting relationship that often sees unemployment fall when stocks go up.
The upshot: If the economy does get to Fed Chairman Ben Bernanke's target of 8 percent unemployment by 2012, that would mean the Standard & Poor's 500 would have to rise to 1,755-a stunning 35 percent gain from current levels and beyond even the already-bullish prognostications for this year.
"That's not our price target, but it may just be the Fed's," Colas wrote in a note to clients.
On average, a 15 to 20 percent drop in stock prices leads to an increase of 1.2 percentage points in unemployment; a rise of 30-35 percent in stocks usually leads to a 0.4-point drop in unemployment...
http://finance.yahoo.com/news/Is-th...6.html?x=0&sec=topStories&pos=5&asset=&ccode=
One view of the relationship between the two suggests that it is the former and not the latter, hence the continuation of the central bank's easy-money policies.
Nick Colas, chief investment strategist at BNY ConvergEx, has run a comparison and found an interesting relationship that often sees unemployment fall when stocks go up.
The upshot: If the economy does get to Fed Chairman Ben Bernanke's target of 8 percent unemployment by 2012, that would mean the Standard & Poor's 500 would have to rise to 1,755-a stunning 35 percent gain from current levels and beyond even the already-bullish prognostications for this year.
"That's not our price target, but it may just be the Fed's," Colas wrote in a note to clients.
On average, a 15 to 20 percent drop in stock prices leads to an increase of 1.2 percentage points in unemployment; a rise of 30-35 percent in stocks usually leads to a 0.4-point drop in unemployment...
http://finance.yahoo.com/news/Is-th...6.html?x=0&sec=topStories&pos=5&asset=&ccode=
