The short answer is that the stock market is primarily focused on corporate profits. Hence, the stock market has done quite well over the past two years, a period of time when corporate profits have “surged” but the U.S. economy as a whole has merely “firmed up.”
The somewhat longer answer is that there is a very large difference between what drives “Main Street,” (the U.S. economy) and what drives “Wall Street” (the stock market). The table below highlights some of those key differences:
Source: BofA Merrill Lynch U.S.
While your investment accounts may be enjoying the recovery in corporate profits, at the same time you may personally be feeling the effects of recession recovery (sluggish employment, higher than normal inflation, etc.). Hopefully, the above chart will help shed some light on the gap between recession/recovery “feelings” and what Wall Street may be “seeing.”
