Bottom-Fishing With Employment Data

Clearly, following employment data has been profitable coming out of recessions most of the time. However, the variability of results over one year is not as reproducible as for three and six months.

Compare the above results to gains for all three, six and 12 month periods since the beginning of 1945. The returns above are significantly better than the average returns and the percentage of positive returns is much better than average.

Returns for all Periods Dow Jones Indices

The table below shows returns if you bought exactly at the closing price the day of each bottom.

Returns Buying Exactly at Bottom Dow Jones Indices

Since most investors are not good at "catching the bottom," the proceeding table estimates if you bought three months after the bottom in each of the recessions, consistent with the definition of a bottom not being exceeded on the downside for three months.

Returns Buying Three Months After Bottom Dow Jones Indices