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An ugly start to 2016 for US stocks has sparked some chatter over the possibility the drop suggests the wider American economy is set for a deep slowdown this year.

Economists at Goldman Sachs aren’t having any of it. “The latest pullback may not necessarily signal a sharp downtown in the broader economy,” says Elad Pashtan, an economist at the bank, in a new report. Pullbacks in the stock market make headlines but don’t necessarily mean downturns, their research finds, writes Adam Samson in New York.

For one, Mr Pashtan says, the composition of the the real economy is quite different than the S&P 500, or even broader measures of US stock performance.

The energy sector in particular has been hit hard by the collapse in crude oil. Energy stocks account for 9.4 per cent of the S&P 500. However, energy only accounts for 3.6 per cent of US national accounts, which is measured by gross output.

Another complication is that publicly-traded companies are often “far larger” than their privately-held counterparts, meaning they tend to do much more business abroad.

Indeed, the median S&P 500 company derives a third of its sales from overseas, while exports only account for 12.5 per cent of GDP. That means S&P 500 companies are much more sensitive to an appreciating US dollar and slowing global growth.

The data may also be obscured by the way labour costs affect companies and the overall economy differently. Wages are rising, albeit modestly, as slack in the jobs market softens and puts pressure on corporate profit margins. But gross domestic product is “a measure of total expenditure, which is equal to the economy’s total income, not just corporate profits,” Mr Pashtan notes.

Investors only need to look as far back as 2011, Goldman argues, to find an example of a deep drop in US stocks that neither preceded nor coincided with a recession:

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