--- title: "An updated 'misery index' shows economic stress is nearing a warning zone as stocks push higher" type: "News" locale: "en" url: "https://longbridge.com/en/news/287120714.md" description: "An updated 'JK Misery Index' indicates economic stress is approaching a warning zone, potentially impacting stock market returns. The index, which now includes the 30-year mortgage rate, currently stands at 30.37, below the critical 35 threshold. While U.S. stocks rose sharply, analysts caution that elevated Treasury yields and inflation concerns persist. Historically, the S&P 500 has performed better when the index is below 35, but past trends do not guarantee future outcomes." datetime: "2026-05-20T21:07:28.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/287120714.md) - [en](https://longbridge.com/en/news/287120714.md) - [zh-HK](https://longbridge.com/zh-HK/news/287120714.md) --- # An updated 'misery index' shows economic stress is nearing a warning zone as stocks push higher By Frances Yue U.S. stocks ended sharply higher on Wednesday. An updated version of the "Misery Index," which includes the 30-year mortgage rate, has been moving toward a worrisome level that historically has been followed by weaker returns for the S&P 500. That is the message from the new model introduced by Jay Kaeppel, senior market analyst at SentimenTrader, who called it the "JK Misery Index," in a Wednesday client note. The model builds on the original "Misery Index," a measure popularized in the late 1970s, which simply added up the inflation rate and the unemployment rate to gauge economic pain for households. That gauge surged in the 1970s and early 1980s, when inflation and unemployment levels were both elevated, but Kaeppel said it hasn't been particularly useful as a stock-market indicator for decades. To make the measure more relevant for investors, Kaeppel added the 30-year mortgage rate, currently 6.366%, to bring housing and borrowing costs into the model. He also uses the absolute value of the 12-month change in the consumer price index, meaning sharp moves in inflation in either direction - whether inflationary or deflationary - are treated as potential negatives for stocks. The final step compares the latest reading with its longer-term trend, aiming to capture when pressures from housing costs, consumer prices and the labor market become severe enough to matter for equity investors. "A booming or struggling housing market, soaring or plunging inflation, and large changes in unemployment will all have a meaningful impact on the economy, and by extension, the stock market," Kaeppel wrote in a Wednesday note. "The JMI presently remains favorable, but has been trending in a worrisome direction, and should be monitored closely for a potential warning sign," he added. Kaeppel's warning came as stocks were trying to regain their footing. The Dow Jones Industrial Average DJIA ended sharply higher on Wednesday while the S&P 500 SPX and Nasdaq CompositeCOMP snapped three-day losing streaks, but the same forces that have pressured equities lately, elevated Treasury yields and persistent inflation worries, have not gone away. The JK Misery Index stood at 30.37 as of Wednesday, as shown in the chart below, below the 35 level that Kaeppel considers the dividing line between a favorable and unfavorable backdrop for stocks. Historically, readings below 35 are considered favorable for the stock market, while readings above 35 appeared to be unfavorable, Kaeppel noted. This chart also shows the S&P 500, in black, continuing to trend higher and trading near record territory, while SentimenTrader's JK Misery Index, in blue, has climbed sharply in 2026 toward the 35 threshold, marked by the red dashed line. Since 1962, the S&P 500 has tended to produce stronger returns after months when the JK Misery Index finished below 35 than after months when it finished above that threshold, according to Kaeppel. The gap was especially notable over the following 12 months, he added. The first table below shows S&P 500 performance following months when the JMI ended below 35, going back to 1962, while the second table shows performance following months when the JMI ended above 35. To be sure, even when the gauge has crossed into unfavorable territory in the past, it has not always been followed by an immediate market downturn. And the historical relationship does not mean the same pattern will play out this time. \-Frances Yue This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. 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