Negative Economy, Positive Stock Market

Yes, this can happen.  The economy can continue to post lower numbers and the markets move higher.  Why?  The reason is simple.  Companies are run for profit, most of the time, and the people running those companies must find ways to make money even in hard times.  Sales may rise, stagante, or fall but if they trim enough overhead internally these companies can post higher earnings.

In recent cycles, since the year 2000, companies have had to learn to be faster at creating positive numbers by controlling expenses more quickly and ahead of downturns.  It makes sense that some large corporations will do better at controlling costs than what we became used to during the 20 years prior to 2000.  Cutting overhead includes putting people out of work, taking them off the payroll, which also makes the unemployment rate climb.  It is a catch 22, almost… since it can have a positive outcome in the long run.  In the future these companies making good net earnings will later hire people again, and quicker, as the economy becomes more positive. 

It’s all part of the same long cycle.  We should be greatful for our system because the downturns in the cycles are much shorter than they are in other countries.  In fact, we should be worried about how much congress is changing our system and limiting free trade and capitalism.