A Bull Market That Leaves Consumers Behind

The decline in U.S. stocks since the election has left the market looking very cheap relative to corporate earnings. How cheap? Bloomberg’s Whitney Kisling, Inyoung Hwang and Rita Nazareth do the math and find that shares are as low as they’ve been compared to corporate profits in any bull market since the Reagan era.

Investors, the story points out, don’t seem to have a lot of confidence in the economy. The upcoming budget negotiations may be an influence on this; investors may also be gunshy, with the memory of the 2008 crash still fresh in mind.

Investment bank strategists see this as a buying opportunity. It may well be. Over the long term, though, you might consider the chart above. Consumer spending has advanced less than in any recovery since 1982. The only way corporate profits can keep rising is if consumer income and spending recover, too.

A version of this post appeared earlier in the Market Now newsletter. Click here to register at Bloomberg.com and subscribe to The Market Now daily email.

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