Stocks were off to a blistering pace in the first half of the year. Meanwhile, the U.S. economy 's trajectory is more tepid, somewhat divorced from that of stocks, economists said. That disconnect may be confusing to consumers and investors who assume the stock market and economy mirror one another, moving in lockstep. "I think there's this widespread perception the two should be in sync," said Joe Seydl, a senior markets economist at J.P. Morgan Private Bank. "But, from a purely analytical perspective, they're two very different phenomena," Seydl said. "We're talking about apples and oranges in many ways." The S&P 500 U.S. stock index rose nearly 10% in the first half of 2026. The Dow Jones Industrial Average, another stock index, climbed almost 9% over the same period its best first-half performance since 2021 . Those gains follow a string of blockbuster years for U.S. stocks: The S&P 500 rallied 24% in 2023, 23% in 2024 and 16% in 2025 the second best three-year win streak since 2000 . President Donald Trump cited the stock market's strength as a contributor to his soaring wealth after returning to office for a second term, following the release of a mandatory financial disclosure form last week . Meanwhile, "real" U.S. gross domestic product a measure of economic output, after inflation has decelerated from about 3.3% in 2023 to roughly 1.9% so far in 2026, Seydl said. To be sure, the state of the U.S. economy isn't necessarily poor. The pace of growth has been "steady," Seydl said. Mark Zandi, chief economist at Moody's, characterized GDP growth around 2% as "soft," though. It's roughly flat from last year, he said. "We're growing. We're not in recession," Zandi said. "But we're not going anywhere quickly." Federal Reserve officials in June estimated the economy would grow at a 2.2% pace in 2026. Consensus among economists is largely concentrated around a 2% growth forecast for the year, Zandi said. Meanwhile, the labor market is showing weakness, Zandi said. Labor force participation is near its lowest level in about 50 years outside of the Covid-19 pandemic. Employers are hiring at their slowest pace in more than 10 years, excluding the pandemic. Long-term unemployment has risen steadily . Additionally, consumer sentiment tumbled to a record low in May amid fears of higher inflation, according to the University of Michigan's Surveys of Consumers. Sentiment rebounded somewhat in June, though remains " unfavorable ," it said. The stock market and economy generally "travel together" but sometimes "deviate quite significantly," Zandi said. "And this is one of those times," he said. Artificial intelligence seems to be the main reason for the divergence, economists said. The stocks of AI companies have gone "skyward" and buoyed the broader stock market, Zandi said. Technology accounts for about 35% of the stock market, and roughly 50% when considering an expanded technology group that also includes Alphabet , Amazon , Meta and Tesla which are classified as consumer companies but trade like Big Tech, Seydl said....
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