While the US general election is in full swing these days, the development of the new crown epidemic in the US has entered a stage of rapid deterioration. On 6 November, the number of new cases in the United States reached 132,540, which even exceeded the total number of cases in a single day when the epidemic was at its worst (April and July).

Global epidemic statistics on November 6

Although the overall mortality rate has been reduced, the impact of business shutdowns and urban lockups caused by the epidemic on ordinary employment and business operations (especially the service industry and small and medium-sized businesses) is obvious.

However, the U.S. stock market has not shown how much it has been affected. Instead, it has been advancing violently in the past few months and has almost returned to the level before the epidemic. The Nasdaq index, which mainly includes technology stocks, even hit an all-time high not long ago.

The Dow Jones Index has almost recovered to its high point at the beginning of this year

The Nasdaq Index hits an all-time high

Isn’t the stock market a barometer of the economy? Why is there such a big contrast between the performance of the stock market and the real economy?

There are of course many reasons for this.

For example, in the Nasdaq Index, most of the growth comes from a few giant companies that have made a lot of money due to the demand for online services caused by the epidemic, such as Facebook, Tesla, Apple, Amazon, and Google, etc. But even so, it cannot fully explain the rebound and strength of the stocks of most other companies.

Recently, Frederik Schlingemann, a finance professor at the University of Pittsburgh, and Rene Stulz, a finance professor at Ohio State University, published an article titled "Has the stock market become less representative of the economy?" , which did an in-depth analysis of the causes of this problem.

In short, the conclusion is:

Compared with the 1970s, the contribution of companies listed on the American Stock Exchange to employment and GDP has dropped significantly. The main reason behind this is that the United States has completed the transition from a manufacturing economy to a service economy. Relatively speaking, the labor force employed by service-oriented companies is much lower than that of manufacturing companies.

For example, in the 1970s and early 1980s, the company with the largest market capitalization in the US stock market was General Electric. At that time, the total number of employees of General Electric was about 400,000, most of which were in the United States.

However, today, Microsoft and Apple, which have the largest market capitalizations in the US stock market, have approximately 100,000 and 90,000 employees in the United States, which together are less than half of the total number of General Electric employees that year.

In 1973, the number of employees employed by all listed companies accounted for about 42% of the non-agricultural employment population in the United States. By 2019, this number has fallen below 30%. In other words, more than 70% of the employed population in the United States work in unlisted companies.

The number of employees working in listed companies has dropped sharply

In 1984, approximately 20% of the revenue of US listed companies came from overseas markets outside the US. By 2019, this proportion has risen to about 30%.

Changes in the proportion of overseas market revenue

In the 1970s, the R-squared value of the regression analysis between the market value of a listed company and the number of employees was about 0.5, which means that about 50% of the company's market value changes can be explained by changes in the number of employees. However, this R-squared value has fallen below 0.2 in 2019, indicating that the relationship between the size of the company in the stock market (market value) and the size of the company (number of employees) is becoming less and less obvious.

The relationship between the size of listed companies and the number of employees is becoming less and less obvious

These statistics show that the disconnect between American listed companies and ordinary American workers is getting worse. The ups and downs of listed companies and the stock market have become increasingly unable to reflect the reality of American society and the happiness of ordinary people.

This can also explain why the epidemic in the United States is very serious this year. More than 100,000 small businesses have declared bankruptcy, more than 240,000 Americans have died from the new crown, and tens of millions have lost their jobs. However, the U.S. stock market still performed well, even reaching new highs.

In the long run, a country’s stock market and economic fundamentals are seriously out of touch, which is not a good thing. What is behind it is a serious gap between the rich and the poor, which may lead to intensification of contradictions among the people, which is worthy of investors’ attention. This may also be one of the underlying reasons for the sharp contradictions in the presidential election: a large number of middle and lower classes cannot enjoy the fruits of economic growth. Many reasons will be attributed to globalization and immigration, which have caused sharp contradictions with the elites who enjoy the feast of globalization.

This is from the perspective of data analysis, looking at the various controversies that have been exposed during the US election today.