The stockmarket is not the economy: Exploring the disconnect between GDP growth and Asian equities

Why it is foolish the compare the two

clock • 4 min read

In markets – and in US markets above all – the most crucial lesson from 2020 was a reminder: the stockmarket is not the economy.

Yes, earnings cycles in aggregate move with economic cycles. But index concentration in secular growers and gargantuan price-to-earnings (P/E) multiple expansion hammered home the point that the stockmarket and the economy can have divergent paths, even during a multi-generational recession. Asia has boasted extraordinary nominal growth rates over the past 20 years. China's growth miracle was an outsized contributor, growing from $1trn to more than $14trn over this period - a compound growth rate of nearly 15%. But the rest of Asia was none too shabby, growing from approximately $950b...

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