Stock market and the real economy

The real economy is substantially higher than in 2000. The stock market also higher. The smaller companies in the Wilshire 5000 are doing better than the bigger companies in the S&P 500. The Dow Jones big companies are doing fine too. So stocks may have more upside potential as they catch up to the real economy. Is Obama depressing investors when he raised their tax rate from 35% to 38%? Why should workers work if they are subject to onerous taxation? Companies may start to underperform in terms of profits even though they continue to pump out goods and services. The Basel III capital requirements are biting into European banks. That will help the USA which has already bit the bullet and raised bank capital. Outlook looks rosy for USA stocks unless the Obama boom overheats and causes irrational exuberance and a crash.

U.S. stocks fell, pulling the Standard & Poor’s 500 Index from a five-year high, as European leaders met to discuss the region’s crisis and investors awaited President Barack Obama’s speech on his legislative priorities.

The EU has struggled to agree on legislation to apply Basel III, as governments and the EU Parliament clashed on a range of issues including curbing banker bonuses, capital rules for systemically important banks, and the liquidity requirements


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