Long-term investors are right to obsess over a company’s ability to keep raising the bottom line, but when you’re worried about the impact of an economic slowdown it’s worth focusing on the revenue as well. After all, any accountant can manufacture profit in the short term, but maintaining organic sales when the economy goes cold is harder to fake and takes serious work.

With that in mind, the S&P 500 as a whole doesn’t look great. Everyone is still working hard to make their revenue targets, even raising prices where they think they can get away with it. This earnings season has revealed that the top line is tracking 4.1% above where it was a year ago, which is OK.

But those sales teams are pushing themselves and stretching their relationships with customers in order to make that number happen. Much like the rest of us, they’re fighting to preserve their existing place in the world . . . their market share, cash flow, purchasing power . . . when every dollar means less from day to day.

And when inflation means that every dollar in March 2023 only buys 95% of what it was worth in March 2022, bringing in 4.1% more dollars means you’ve actually fallen 1.1% behind. That’s why it’s dangerous for the S&P 500 to be “growing” at this negative inflation-adjusted (real) rate . . . the biggest businesses in America are moving as fast as they can and they’re only growing on paper.

In real life, where it matters, they’re falling behind. As a group, they’re shrinking. And that’s a problem for the S&P 500 and people who invest in the group. Shrinking companies need to make tough choices: pull the plug on growth ventures that are obviously not working yet, cut costs to stop the bleeding, focus on survival instead of success.

If you’re looking at a company that is not managing to push the top line at least 5% from last year, that’s a shrinking company. It’s already in a real recession. The numbers might not look like they’re going down because everyone in that company is still working so hard to keep things moving . . . but once you factor in inflation, they’re going down.

Think of your own finances. If you aren’t earning 5% more than you were a year ago, you’ve lost net purchasing power. You’ve fallen behind. Same thing with the companies you want to invest in.

Go across the sectors and there are plenty of hot spots. As a whole, consumer staples stocks have managed to boost their revenue by 5.3% . . . a little ahead of inflation. They’re eking out a tiny bit of progress. They’re collectively bigger. We’re looking at Big Food, grocery chains, the kinds of products you see in drugstores.

Believe it or not, they’re winning. The industrials are winning, largely thanks to the airlines bouncing back strong but also thanks to Big Auto. As long as people keep flying and driving, things actually look pretty good there.

Real estate is winning. Rents are going up, not down. If you see a REIT where that is not the case, avoid it. You work hard for your money. Invest it in a company that can at least charge enough to cover rising expenses.

Consumer discretionary stocks are winning. Across the group, which is dominated by Amazon (AMZN), revenue is up 9% in the past year. Even after you adjust for inflation, that’s practically as good as the S&P 500 on paper. Or to say that differently, the growth rate you think you’re seeing on the S&P 500 is actually the real post-inflation growth that AMZN and peers are providing.

Likewise, despite all the talk about occasional bad banks, the financials are making money hand over fist. Revenue in the sector climbed 11% in the past year and is only decelerating a bit here as we go into summer. The Fed is actually a smart banker’s friend. It’s hard for a strong institution to lose money here.

And then there are the utilities. But while they had a great quarter, their results are hitting a wall now. That’s what we expect from the utilities. It’s a slow business and often a game of attrition where the slowest decline wins.

Now here’s the thing. I don’t really expect the S&P 500 to get the growth engines humming again before the last few months of the year. I don’t expect inflation to drop below 3% either, much less hit the Fed’s 2% target. This means that the market as a whole is probably going to keep shrinking on a net basis for the next 4-5 months.

Do you really want to pour money into shrinking companies? I don’t. Every sector that I did not mention above is failing to keep up with inflation. They’re running hard and losing ground.

Of course you don’t have to buy sector by sector. There are plenty of stocks that are still growing the top line a lot faster than inflation robs that achievement of meaning. We focus on these stocks in GameChangers especially. Suddenly, that portfolio has come roaring to life after the long bear market.

It’s still early. There’s still plenty of upside here to capture when the bulls really get rolling. But this earnings season has been a real green light for growth companies to go, go, GO. We started building a position in HUBS at $350. We were in PLTR under $7.50. Come on!

But even with their tremendous recent moves, these stocks were basically left for dead last year. The fundamentals did not weaken. The companies are still making money . . . staying ahead of inflation and actually growing in real terms. They’re disrupting slower and older rivals.

Only the valuations have plunged. And like everything on Wall Street, the pendulum swung too far from bubble to bust, making them cheap. After all, they’re significantly bigger and more mature than they were three years ago. The stocks need to reflect that or we need to admit that the world is crazy.