As the stock market continues to reach new heights, there are growing concerns about its detachment from the true state of the economy. Recent data points to a stark disparity between Wall Street’s rally and the challenges faced by the broader economic landscape.
Job openings, a key indicator of economic health, are experiencing a sharp decline, painting a contrasting picture to the soaring S&P 500. This phenomenon, coupled with the resurgence of multiple jobholders, surpassing 2019 levels, suggests that we may be following a trajectory reminiscent of the 14-year economic cycle that began in 2009.
The aftermath of the 2020 economic stimulus, which injected $5 trillion into the markets, is also coming under scrutiny. While the stock market reaped the benefits, the impact on the broader population has been uneven, with the majority of the stimulus disproportionately benefiting the top 1%.
Adding to the economic complexities, a concerning trend has emerged among venture-backed companies. In 2023 alone, a staggering 3,200 venture-backed U.S. companies have gone out of business, collectively raising $27.2 billion in venture funding. This wave of closures challenges the notion of a soft landing and raises questions about the sustainability of economic growth.
Furthermore, the Federal Reserve faces a daunting task in managing inflation, which has spiked to a peak level of 8.9%. Unlike previous economic soft landings, the current scenario presents a unique challenge, with the Fed navigating the need to curb inflation from an elevated starting point. There is a delicate balance to be struck, as an overzealous approach to tighten monetary policy may risk pushing the economy into a recession.
A critical metric highlighting the potential exuberance in the stock market is Apple’s Price to Sales ratio. In 2023, it stands at 8.04x, a significant departure from historical levels in 2013 (2.40x), 2003 (0.69x), and 1993 (0.32x). These figures underscore the potential risk of a passive overdose in the market, prompting investors to tread cautiously amid the evolving economic landscape.
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Job Openings vs.
S&P 📉📈 pic.twitter.com/WDDcQpW9WU— Win Smart, CFA (@WinfieldSmart) December 10, 2023
More evidence that we're in the same 14 year economic cycle that began in 2009.
Multiple jobholders now exceeds 2019 and is back on the linear trend. Saving the stock market with $5 trillion in 2020 only benefited the top 1%. t.co/2MHmHcEAu8 pic.twitter.com/paJAHXk20s
— Financelot (@FinanceLancelot) December 10, 2023
3,200 venture-backed U.S companies have gone out of business in 2023
Collectively they raised $27.2B in venture funding pic.twitter.com/vs1yljWijb
— BuccoCapital Guy (@buccocapital) December 10, 2023
🇺🇸 In each US economic soft landing, the CPI rate was below 5% in each case.
This time the Fed has to fight #inflation from a peak level of 8.9%.
The Fed’s over-tightening bias to ensure inflation is lowered for good from such an elevated level risks #recession.
Chart: Alger pic.twitter.com/mlZRhP1Zgc
— Alex Joosten (@joosteninvestor) December 10, 2023
A Passive Overdose
Apple Price to Sales
2023: 8.04x
2013: 2.40x
2003: 0.69x
1993: 0.32x*2007 high was 5.9x, 2000 high was 2.8x, Bloomberg data. pic.twitter.com/ufcmMGQ3j8
— Lawrence McDonald (@Convertbond) December 10, 2023