The Market Is Detached From The Real Economy

“The stock market is not the economy.”

Such is the latest rationalization to support the “bull market” narrative. The question, however, is the validity of the statement. During the 2020 economic shutdown and surging market rebound I stated:

“There is currently a ‘Great Divide’ happening between the near ‘depressionary’ economy versus a surging bull market in equities. Given the relationship between the two, they both can’t be right.”

Of course, as we now know, the market ran well ahead of economic growth, and in 2022, much of the market declined to realign with economic realities. Such should be unsurprising given the close relationship between the economy, earnings, and asset prices over time. The chart below compares the three going back to 1947 with an estimate for 2023 using the latest data points.

S&P 500 Growth