We’ve called this chart the most beautiful stock market indicator in the world. It overlays the S&P 500 (blue line) vs. initial jobless claims (inverted, red line).
For years now, the two lines have matched up perfectly. And it continues, as the stock market sits at record highs, while initial claims fall to post-recession lows.
Michael O’Rourke of JonesTrading brought up the indicator yesterday in his nightly note:
We definitely view Initial Claims as a key indicator. I have used the relationship between lower claims and a higher S&P 500 as an indicator for some time now (going back to 2009). Back then I was among the few using it, today its use is commonplace. We believed the relationship would fade as claims approached the pre-crisis constant of 300,000. Since the market is at new highs, however, perhaps we were too quick to discount this indicator. Nonetheless, now that we are within 10% of that pre-crisis constant, we still find it challenging to get too excited.
And here’s the chart.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.