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Why does the stock market have an inverse relationship with the health of the economy?

The economy overall has been sluggish during the Obama administration. Yet the stock market does not seem to have been depressed. Why is this so?

Investing, Stocks
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June 2016

I assume that you are making this assumption based on GDP statistics, which are not the best measure to predict stock returns. Nobody knows for sure why stocks are where they are today, but here are my two cents:

Check out this chart and you can see earning for the companies in the S&P 500 have grown amazingly since 2009:


This also demonstrates that earnings matter a lot more to stock prices than the GDP.

Another more important indicator than GDP for stock prices is liquidity. Here is a link that shows the Fed's balance sheet compared to the S&P 500.


You could make the case that the low interest rates and expansionary monetary policies of the Fed have also increased the value of stocks.

July 2016