This is a perfect example of how what happens on Wall Street does not always translate to Main Street . The head of GM at the time, Charles Wilson, said, “... for years I thought what was good for our country was good for General Motors, and vice versa” (often misquoted as “What’s good for General Motors is good for America”). Ad: Before Stocks Crash... THISWill Stocks are soaring, and if you're worried about the market top... good news. There's a totally different market you should be paying VERY close attention to. It's a "canary in the coal mine" that could give you a huge clue about when to sell stocks. And knowing what to do in this crash could make you a fortune. (It led some folks to 772% gains in 2009.) Get the full story here. It’s difficult to imagine his present-day analogue – Microsoft CEO Satya Nadella, or Alphabet head Sundar Pichai – saying anything similar. What’s good for the largest American companies today has, at best, an indirect relationship to what’s good for the economy. Stocks have been rising – despite the worst economic backdrop since the Great Depression – because the link between Wall Street and Main Street isn’t just tenuous... there’s no particular reason to think there even should be a connection at all. And in fact, that relationship has shown to work in exactly the opposite way than what you might think – stocks in fact tend to fall in a strong economy.
irrelevant for predicting future equity returns. This is because long-run equity returns depend on dividend yields and the growth of per share dividends. In other words... stock market returns are all about earnings and what investors receive of those earnings. And that has nothing to do with economic growth . A more recent paper, “Have Exchange- Listed Firms Become Less Important for the Economy?,” by the National Bureau of Economic Research, asks why we’re even talking about this at all... There is no compelling theoretical reason for the stock market to be highly representative of the economy and there are many reasons for why it would not be. Firms that are listed are firms for which a listing is valuable. Not all firms find it valuable to be listed and these unlisted firms differ from listed firms. Further, market capitalization reflects the value of a firm for its shareholders, but this value need not be correlated with a firm’s contribution to employment or GDP. The paper finds that the percentage of total employment at listed companies as a share of total non-farm employment in the U.S. has fallen from 41% in 1973 to 21% in 2019. Think about this... In 1953, the U.S. company with the largest market capitalization – automaker General Motors (GM) – accounted for 1.39% of total U.S. non-farm employment. And in 2019, the biggest company by market cap, Apple (APPL), employed just 0.11% of all working Americans.
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American Consequences
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