- Thomson Reuters
Stocks keep climbing and climbing, but Michael Bloomberg isn’t sure why.
“I cannot for the life of me understand why the market keeps going up,” the former New York City mayor said Tuesday in an interview with CBS News’ Anthony Mason.
“Our economy has some real challenges,” he continued. “The infrastructure’s falling apart. We’re destroying jobs with technology. We are keeping the best and the brightest from around the world from coming to America to create new jobs and create new businesses.
“All of those things would give you pause to worry about the future.”
Stocks have for years been on an upward trajectory, and earlier this month the S&P 500’s bull run became the second-best-performing since World War II. The benchmark index has climbed about 270% from its March 2009 low, according to data from LPL Financial.
In the interview, Bloomberg questioned why stocks had continued to rise as genuine problems plagued the US economy. However, what Bloomberg did not address was that the stock market does not necessarily represent the economy, as many companies that make up the stock market do business overseas.
In fact, throughout the stock market’s recent ascent to new highs, experts have largely looked past middling economic data and attributed the gains to strong corporate-earnings growth.
That brings us to a chart, shared by Deutsche Bank’s Torsten Slok in 2015, showing two pie charts capturing a significant difference between US stocks and the US economy. One chart shows the share of US employment in service industries versus manufacturing industries, and the second shows the share of earnings in the S&P 500 coming from services industries versus manufacturing.
“A key difference between the S&P 500 and GDP is that most of the earnings in the S&P 500 come from the manufacturing/energy/goods-producing sectors, but those sectors make up only 14% of total employment in the US economy,” Slok wrote at the time.
Although the data is from 2015, the point the charts illustrate is still relevant:
- Deutsche Bank