There is a wide disconnect between Wall Street and Main Street right now — and according to a new MarketWatch analysis, economic health no longer dictates stock-market returns the way it once did. Artificial intelligence, the column argues, could drive the two even further apart.
Stock market vs economy (Credits: MarketWatch)
The argument comes from MarketWatch contributor Mark Hulbert, who writes that the correlation between the strength of the economy and the performance of the stock market has been declining — a profound development for anyone who still treats the market as a barometer of everyday economic life.
Stock Market vs Economy: The Disconnect in the Numbers
Hulbert’s back-of-the-envelope math makes the point starkly: if the stock market still moved in lockstep with the economy, the S&P 500 would be 45% lower than it is today. The gap is visible in the mood of the country. Consumer sentiment hit an all-time low of 44.8 this summer, and at 48.0 it remains only marginally higher — even as political leaders celebrate the stock market’s new highs.
That does not mean the economy has no impact on stocks at all, Hulbert notes. But its declining correlation with the market is the story, and AI may very well accelerate it.
How AI Could Widen the Wall Street-Main Street Gap
In some of the more dystopian visions of an AI-dominated future, Hulbert writes, AI companies’ profits mushroom even as millions of jobs are lost and unemployment skyrockets. If that were to happen, the Wall Street-Main Street disconnect would become complete — and the stock market would lose even more of its status as a barometer of economic health.
For investors, the column’s takeaway is a shift in focus: less attention on whether a recession is imminent or how fast the economy is growing, and more on profit margins and price-to-earnings multiples — the company-level fundamentals that increasingly drive returns in a market decoupled from the broader economy.
The piece is an explainer of one analyst’s argument, not a forecast: it describes a structural shift in what moves markets, rather than predicting where any index goes next. But as AI reshapes which companies profit and which workers benefit, the old habit of reading the economy off the stock ticker looks harder to defend than ever.
Also Read: U.S. Stock Market Fracturing Into Two Camps: AI Selloff vs. Everything Else, MarketWatch Reports
Source: MarketWatch — read the full story there.
