Stock Markets Soaring

Record High for Stocks

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Stock markets reached a record high this week but the economy and job growth is still fairly stagnant and the gulf may widen further with impending budget cuts.  This article pointed out that even though stock prices are climbing higher and higher, that doesn’t automatically translate into a growing economy. 

Ethan Harris, co-head of global economics at Bank of America Merrill Lynch is quoted saying “So far in this recovery, corporations have captured an unusually high share of the income gains… The U.S. corporate sector is in a lot better health than the overall economy.  And until we get a full recovery in the labor market, this will persist.” 

With so many people still unable to find gainful employment, corporations are keeping a larger share of their profits since they face very little pressure to raise salaries.  The article calls this ‘a golden age for corporate profits, especially among multinational giants that are also benefiting from faster growth in emerging economies like China and India.

Time will tell if the gains in the stock market endure and how far behind the general health of the economy lags.