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?
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.
This economy is actually not doing that bad. It's true that unemployment has not done that well, but US companies in general have high cash levels and have seen some nice growth in earnings in the recent years. Also, the stock market is usually thought of as a leading economic indicator. This is because the market incorporates all information including future expectations. Considering that during the 2008 crash people thought the end of the world was upon us, it's easy to see how expectations have improved since then, hence, the market goes up.