In a perfect world, picking stocks is a logical game; blue-chip names ebb and flow with the market, but given enough time, you can at least match the broad market’s long-term gains.

Take the stocks most investors deem economic bellwethers, for instance … names like FedEx (NYSE:FDX), Bank of America (NYSE:BAC) and Alcoa (NYSE:AA). Not only are these companies intrinsically linked to the economy, since they are in some ways “the market,” but they should ebb and flow with the S&P 500.

We don’t live and trade in a perfect world, though, and the logical outcome isn’t inherently the one we get. Is it possible, then, that even a very basic assumption — like the link between major cyclical companies and the overall market — doesn’t actually hold water?

There’s only one way to find out.

Charts Don’t Lie

To be fair, not everyone has access to a chart that can compare the percentage-change in stock prices or over a particular period of time. But it can be done mathematically, and even those with the right charting software rarely perform this exercise. They should, though, as it can be a real eye opener.

The nearby chart tells the tale of the connection between the market’s most prolific stocks and the S&P 500. Or, perhaps it would be more accurate to say it tells the tale of the disconnect.

Through 2006, International Business Machines (NYSE:IBM), Walmart (NYSE:WMT), Alcoa, FedEx and Bank of America pretty well moved in tandem with the S&P 500. Even when things got bearishly turbulent in 2007 and 2008, at least the broad market and its major names were moving in the same direction. From 2009 on, however — when the rising tide of the economy should have lifted all boats at least somewhat equally — we started to see some serious disparity between the broad market and some of its presumed bellwethers.

As wide as the post-2009 divergence seems on the 2006-12 chart, though, it’s actually an even more dramatic divergence when you zoom in on just the 2009-12 timeframe.

Lesson learned? Be careful of assuming that a blue-chip name will reliably track (let alone outperform) its corresponding market index.

That’s not the end of this exercise, however.

The Earnings Disconnect

As if the non-correlation between the market’s major names and the broad market itself weren’t confounding enough, earnings don’t necessarily rise and fall for all companies in step with the economy, either. That’s not always a bad thing, though.

The nearby chart of Walmart and its earnings trend since 2006 is a clear case of a welcome lack of vulnerability to a recession. Though the economy was struggling in 2007 and 2008, Walmart’s earnings growth trend never faltered — even though the stock did.

The same goes for IBM’s earnings growth streak.

Don’t get the wrong idea. For other bellwether companies, the 2007-08 economic lull did take a toll on the bottom line. Bank of America was one of them. Yet, BofA didn’t snap out of its funk in 2009. In fact, it’s still not clear if Bank of America has snapped out of its funk yet.

Before assuming that earnings never ebb and flow with the broad economy, though, investors can take a little solace in knowing that FedEx’s income trend closely mirrors the economy’s growth and contraction. The stock also moved accordingly.

And, to a lesser extent, Alcoa’s earnings trend is loosely correlated with the economy’s rise and fall. The only problem with assuming Alcoa is a reliable bellwether is that its earnings have fallen off again of late, while the rest of the market’s earnings have continued to grow.

Moral of the Story

Seeing all these charts could lead an investor to wonder: “Why bother investing at all?” After all, owning a blue-chip bellwether clearly is no guarantee that you’ll even be able to keep pace with the overall market, and earnings seems to be only loosely linked — at best — to the economy’s ebb and flow.

Well, don’t throw in the towel just yet, as there is some logic to the whole shebang.

While most stocks don’t trade in close tandem with the S&P 500, nor do earnings rise and fall uniformly with the economy, at least all five of these stocks ultimately reflected their company’s underlying earnings. IBM clearly was the strongest earner of the five, and its stock has easily outpaced the S&P 500. At the other end of the performance spectrum is Bank of America, which is the problem child on the earnings front. The other three stocks traded in accordance with their underlying earnings trends, too.

You mean …?

That’s right — when it’s all said and done, an individual stock’s earnings still are the key to it all, and the broader market’s direction means very little in the long run.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.