Stock Price Growth In US Driven by Cost Savings Not Revenue Growth

This graph shows that margin growth has been driving the growth in earnings per share.  Corporations have been cutting costs in order to increase margins and boost stock prices.

They have also been cutting investment spending which also boosts margins.  This raises a question about sustaining the growth in stock prices.  At some point cost cutting will become less effective and sales will have to increase in order to boost profits and stock prices.  Cutting back on investment spending, however,  impairs the ability to expand sales.  Many corporations have replaced investment spending with acquisitions that might increase revenues.  They also tend to engage in layoffs following acquisition's. For example, Microsoft announced a very large layoff following an acquisition. Wall Street liked the announcement and Microsoft got a good boost in its stock price. Its no wonder that job growth has been weak relative to the growth in corporate earnings.