Yardeni: Lower Unemployment in 2012 = Higher Stock Market in 2012

Initial unemployment claims may be the most important economic indicator for the stock market in 2012. It is one of the three components of our Fundamental Stock Market Indicator (FSMI), which is highly correlated with the S&P 500, [see graph below] so if initial unemployment claims remain under 400,000 and possibly continue to head lower during January, that would support the strong stock market rally that has kicked off the New Year so far.

So says Ed Yardeni (http://blog.yardeni.com) in edited excerpts from his original article*.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Yardeni goes on to say, in part:

The FSMI is still range-bound, but has moved higher during seven of the past nine weeks and is approaching its February 2011 cyclical peak. The recent rebound is attributable to the sharp drop in initial unemployment claims late last year…

Also supportive is the recent strength in the CRB raw industrials spot price index, which is another component of our FSMI . This commodity price index is also highly correlated with the S&P 500 Transportation index [as can be seen above], which is only 5% below its record high of early last year. (More for subscribers.)

*http://blog.yardeni.com/2012/01/fundamental-stock-market-indicator.html

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