The stock market has been booming for the last five and a half years, yet GDP growth in the same period has been sluggish.

“Despite the contradiction in U.S. GDP, companies did quite well,” MFS officials wrote in a briefing paper at a mid-year investment round table on Tuesday.

GDP, which has been growing at an annual rate of 2 percent or less since the recovery began some five years ago (and dropped 2.9 percent in the first quarter 2014 from the fourth quarter of 2013), is not measuring the strength of private company growth. MFS officials said earnings growth was booming in the second half of last year -- it rose 5.6 percent in the third quarter and 7.9 percent in the fourth quarter. In the first quarter this year, earnings rose 3.4 percent, MFS said.

“That’s a lot better than 2 percent or when the government says the economy is contracting,” said James Swanson, chief investment strategist for MFS. Swanson added. He added that inflation is under control. And MFS officials said the Federal Reserve Board will very gradually raise interest rates over the next five years. It will attempt “to keep the belly of the (yield) curve down,” MFS wrote in a paper analyzing the economy.

Swanson said the up cycle in the stock market still has two or three years to go. Net margins of S&P 500 companies, he added, have been growing for the last four years.

If the recovery is sluggish or if the economy potentially could go back into recession, it would inevitably “show up in a collapse in earnings,” Swanson noted. Equities are still fairly valued,” Swanson added.  

MFS also pointed to the rise in company revenues as another sign that the economy is neither sluggish nor ready to fall back into recession. Company revenues have risen for the last seven quarters, according to MFS.

So the disconnect between those who said it is a sluggish recovery and those who say the recovery is within historic post WWII recovery norms of between 3 percent and 5 percent annual growth is based on using the wrong yardsticks, according to Swanson.

Some stock market indexes aren’t keeping up with the changes in the U.S. economy. For example the S&P 500 is about 40 percent manufacturing, Swanson said. However, Swanson said, American manufacturing is starting to perform much better.

Still, one sector that has been slowing the recovery, he added, is the housing industry, which made up 6.3 percent of GDP just before the bubble and in the first quarter was only about half of that.

MFS said four factors have kept housing from a strong rebound: Tight credit standards continue, increasing mortgage rates, delayed household formation owing to high levels of student debt and slow jobs recovery.

“I think this will be the final propellant in pushing the economic story forward,” Swanson said.

Swanson believes that the market’s up cycle is “sustainable.” He said both the economic recovery and the market up cycle will end, “but they still have a while to go.”