If The Economy And The Market Were Still Connected...

... the relationship would look something like this sensitivity table between GDP and EPS.

What is not shown in the ceteris paribus table above is that the primary linkage between the two variables, the Fed's balance sheet, is only impacting PE multiples, has hardly benefited EPS in the past year (while reducing corporate revenues) and would have resulted in a sub-stall speed GDP if it weren't for a surge in petroleum exports and the infamous GDP revision. In other words, soaring bank deposits (as a proxy for reserves) only benefit stock prices, and nothing else as even Obama has figured out by now.

That said, what is of note is that the "2013 recovery" story is now over and out: the market sensitivity between 0.1% and 3.1% 2013 GDP growth is non-existent. Where the real sensitivity now lies is in 2014 GDP growth (always "next year", never "this year") which depending on whether it is 0% or 5% would result in a 30 point swing in EPS. Attach the current 17x multiple to this, and at least on paper, the S&P 500 now has a 500 point contingent delta depending on just how much the US economy grows next year.

We leave the question of just how realistic it is that US GDP can grow 5% or 4% or 2% or 1% in a time when the Fed is about to commence tapering, when China's growth estimates are consistently revised downward, when private loan growth in Europe is at an all time low, when the entire world has reached its credit saturation tipping point, and when BLS-measured inflation is heading in the wrong direction, very much open.